As a trader, you need to develop a Forex trading strategy that will allow you to quickly identify weaknesses and make adjustments as you continue to trade. The classic approach used to evaluate the risks in the currency trading system is the inverted pyramid approach. All the macroeconomic factors that influence the currency pair chosen are a function of the tip of the inverted pyramid. All technical factors are taken into account when moving down to the bottom of the pyramid. Traders attribute weight to different parts of the pyramid. Purely technical traders can apply more weight to the bottom of the inverted pyramid (upside down triangle), while major traders can apply more weight to the top.
To use the inverted pyramid, you will need to understand the macroeconomic factors that are a function of the tip of the inverted pyramid. These include international issues that affect the world trade community. These types of issues can be judged by news and global coverage. New networks, such as CNN, provide up-to-date information on terrorism, oil prices and other such issues.
In order to take into account the technical factors applicable to the pyramid, you will need to determine the specificity and precipitate of the particular market in which you trade, as well as of each market that affects the market in which you trade. You need to decide the type of technical indicators that will be used in your Forex trading strategy. Some traders rely on chance and chance, while others do more sophisticated mathematical calculations to calculate weighted moving averages. You need to be able to develop and visualize a market picture that identifies events that are relevant to market impact. You also need to develop a common sense of the market. News and specific market reports will help you develop a picture of the market and also indicate the direction in which the market is headed.
You will need to determine which currency pairs are volatile in relation to the identified macroeconomic environment and market conditions. You will need to have market knowledge to identify and differentiate market metrics from events that are not real. Your analysis of the data obtained should indicate whether price movements are a trend or volatility in the currency trading system. You will then be able to use this analysis to narrow your options down to the deals that offer the most potential.
You must be able to set floors and ceilings in your technical analysis to identify trading levels and then use those levels in your Forex trading strategy. Technical models need to be developed to show the direction of trading in specific currency pairs. After narrowing down a particular currency pair for trading, you will need to review its market sludge as applied to the technical analysis. You will need to determine entry and exit points for the transactions you choose.