Do you want to generate more profits from FX market? If you do, then you have to understand the concept of fair value. If you can master this knowledge well, you will be the ultimate winner and you can harvest the maximum profit from FX market.
Many people maybe doubt on how the FX markets move. The simplest and most appropriate explanation can be defined through the equation below:
Price = FX Fundamentals + Investor Perception on currency
Basically, FX fundamentals play less important role than the investor perception in determining the value of each currency or also known as price, which highlighted on equation previously. Investor perception always refers to emotions (greed and fear) of investors.
There are 2 categories of prices, long term prices and short term prices. A long term price is more affected by long term fundamentals, whereas a short term price is more affected by emotions. Fluctuation of prices happen actively, eventually causes the prices distort away from fair value.
Most of the time, the scenario above can be studied through FX chart. These FX price spikes never stop and the prices will anyhow recover back to normal level. There are some ways for you to judge fair value and to take advantage from fair value. The simplest way to judge fair value is averaging the longer term moving.
In big bull trends the 40 ma will usually operate as huge support for the longer term trend and drop back to the 18 day ma. At this moment, you are advised to load in positions in the direction of the general trend.
Just study any trend which you like. Try to focus on how effective these averages are to buy or sell into, after a fluctuation up or down. Do not buy if the current prices drop below the averages. You are advised to only buy until the price turn up above the average.
There are a few technical studies which can be applied to FX market, like stochastic and RSI. These studies are helping you to predict the market FX based on computation using pass records and forecasts.
Another important tool which is important to help you in FX market is the FX chart. By using FX chart, you can know how frequent buying back to key moving averages which backup by momentum works. You really can gain lots of money by purchasing back to these areas of fair value.
FX market can make rich in short moments, meanwhile it can also make someone lost all their properties. To ensure yourself in winning position, you should equip yourself with adequate knowledge.
Final piece of advice Do you know 7 out of 10 traders keep losing money in Forex market? That's right, 70% of individual FX traders keep losing their hard-earned money in the market; while the rest of the 30% work freely at home and earn millions annually. Wonder what differs between the losing 70% and the winning 30%? Forex trading skills and the trading system! If you wish success in Forex trading, be very sure that the road is long and you need to study hard and smart to learn what it takes. The Forex market is definitely not a game for newbie and you need to brush up your skills before getting your hands wet. Article by Teddy Low. |
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