2Bull Forex Blog

The Forex market is very much a technical market and as such it is supported by a barrage of software tools which are not simply helpful to the trader but are an absolutely essential part of trading in a market which enjoys both high volume and considerable volatility. It is essential therefore that traders not only know what tools are available to them but are skilled in their use.

At the heart of Forex trading is a wealth of information which has to be not only constantly updated but which also has to be accurate. Such data, which is essentially displayed through a series of computer screens, needs to cover both current currency price data and historical price data and the systems in use needs to be able to analyze and display this data in a form that is of value to the trader.

In addition traders need to have fast and easy access to current and historical political and economic data and have to have the ability to analyze currency movements in relation to such information.

There are two fundamental forms of trading in operation today - reactive trading (in which a trader buys and sells in direct response to political and economic events) and speculative trading (in which a trader buys and sells on the basis of his prediction of the direction in which the market will move in response to current political and economic events). Whether a trader is buying and selling on a reactive or speculative basis it is essential that he has accurate and up-to-date information on which to base his decision.

But information alone is not enough and traders also need to have access to a range of tools that allow them to analyze this information, whether such analysis is fundamental or technical in nature.

Fundamental analysis is based upon the belief that the market moves in response to such things as political events, economic news, changes in trading patterns, movements in interest and similar events. Tools required here will therefore include such things as software programs that can plot currency movements against trade data and interest rate data and use historic data to build models which predict movements in a huge variety of different political and economic conditions.

Technical analysis by contrast is based upon the belief that the market follows a pattern which has been well established over time and that future movements in the market can be predicted by analyzing and charting historical data to produce a series of models which can be used to predict future patterns.

Whatever your position either as a reactive or speculative trading and whether you are buying or selling on the basis of a fundamental or technical analysis of the market the one thing you need is information. In essence this means using a range of complex analytical tools and you will need to take the time to familiarize yourself with the tools available to you and then to master the skill of using these tools.

If you want to make money in forex trading the first point to keep in mind is you cannot make a regular income. That’s not to say you cannot make long term profits – you can, but the e-books and forex day trading courses that promise regular profits are doomed to failure.

The forex markets are volatile and they produce moves each day that in theory can make you thousands of dollars – The problem is however is trying to catch these moves for profit in advance.

The myth of regular in income from forex markets is spread by forex day trading system vendors, however Forex day trading systems and profits are a contradiction in terms:

Day traders always lose longer term and you never see a real time track record of profits.

Why?

Because you can never get the odds on your side, as the data in short time frames is meaningless.

There are other currency trading systems that say that markets move with scientific accuracy and because of this you can make a regular income.

These theories are loved by the far out investment crowd and the king of the theories is Elliot wave.

Elliot wave says it’s a scientific theory and then tells you that you have to decide which patterns are correct to trade!

Anyone can see the flaw in this theory – if it’s scientific, then you should not have to make subjective judgments it should be objective!

Let’s look at some positives when making money from forex trading.

Firstly, you can get the odds on your side over the longer term and secondly, you can make massive profits.

Just keep these points firmly in mind:

1. It’s an Odds Game

Being an odds game you are never certain to win, but as the skilled gambler knows if you play with the odds you may lose the odd hand but you will win longer term.

2. You cant force profits from the market

You have to wait for the right conditions to present themselves, for your trading signals to be effective – this means waiting weeks or months on some currency trading systems.

The two points discussed above mean that you can make money from forex trading, but your profits will be in erratic time frames.

In light of the above keep this point in mind:

It is not un-common for the top traders in the world to go for months or more than a year or more, without making a profit. When you trade currencies you need to judge your profitability over years, not months or weeks.

Many vendors put about the myth you can make regular profits from forex trading, as it suits their interest – to appeal to the buyer’s greed, these guys simply sell stories and are not traders.

If you don’t believe me ask for a track record of real profits and you won’t get one.

So forget about scientific theories and making profits every week that’s not the reality of forex trading.

The good news is:

That if you play the odds when trading currencies online and take a long term view you can make big consistent capital gains over the longer term.