This article written by José M Piñeiro was originally published in the September 2013 issue of Traders' Magazine.
Traders often underestimate the importance of personal interpretation of economic data in order to come up with a forex trading strategy. Without undermining the potential effectiveness of trading signals and automated trading, a trader’s personal intuitiveness and insight ‘beyond the numbers’ will ultimately make the difference between a successful and a bad forex trader. After all, if a particular trading strategy or a set of trading signals were absolutely effective, then everybody would be a successful trader. If such a successful trading strategy exists, it must be a very well-kept secret. Therefore, how do we improve our odds in forex trading?
- Jose M Piñeiro started in the forex industry in 2002 as an Operations Specialist and then Compliance Offi cer for FXCM in New York when the online retail forex market was still getting off the ground and expanding rapidly. He has spent the last seven years working for Web Financial Group (WFG), based in Madrid. He is now forex analyst for WFG’s forex website, fxmania.com.
Traders often underestimate the importance of personal interpretation of economic data in order to come up with a forex trading strategy. Without undermining the potential effectiveness of trading signals and automated trading, a trader’s personal intuitiveness and insight ‘beyond the numbers’ will ultimately make the difference between a successful and a bad forex trader. After all, if a particular trading strategy or a set of trading signals were absolutely effective, then everybody would be a successful trader. If such a successful trading strategy exists, it must be a very well-kept secret. Therefore, how do we improve our odds in forex trading?
First, Understand the Market
To start, forex traders should take a good look at currency trading symbols. Unlike stock symbols, for instance, there is an inherent meaning in the way currencies are quoted. Let’s take a look at the USD/ JPY, where the US dollar is the base currency and the Japanese yen is the counter currency. The symbol helps traders realise that there is a bi-dimensional relationship in every transaction. This is not so obvious in any other market.
In all transactions, there is a purchase of one item and a simultaneous sale of another item. The ‘USD/ JPY’ symbol shows that someone is buying US dollars and someone is selling Japanese yen or vice-versa. This relationship is not so evident when traders buy shares of Apple. The stock is not listed as APP/USD although traders are buying or selling Apple shares in exchange for US dollars.
Editors’ Picks
EUR/USD trims gains, back below 1.1800
EUR/USD now loses some upside momentum, returning to the area below the 1.1800 support as the Greenback manages to regain some composure following the SCOTUS-led pullback earlier in the session.
GBP/USD off highs, recedes to the sub-1.3500 area
Following earlier highs north of 1.3500 the figure, GBP/USD now faces some renewed downside pressure, revisiting the 1.3490 zone as the US Dollar manages to regain some upside impulse in the latter part of the NA session on Friday.
USD/JPY sticks to gains above 155.00, over one-week top ahead of US data
The USD/JPY pair gains positive traction for the third straight day and climbs to over a one-week top, around the 155.35-155.40 region. Data released early today showed that Japan’s key inflation gauge eased to the slowest pace in two years, tempering expectations for an immediate policy tightening by the Bank of Japan.
Editors’ Picks
EUR/USD: US Dollar comeback in the makes? Premium
The US Dollar (USD) stands victorious at the end of another week, with the EUR/USD pair trading near a four-week low of 1.1742, while the USD retains its strength despite some discouraging American data released at the end of the week.
Gold: Escalating geopolitical tensions help limit losses Premium
Gold (XAU/USD) struggled to make a decisive move in either direction this week as it quickly recovered above $5,000 after posting losses on Monday and Tuesday.
GBP/USD: Pound Sterling braces for more pain, as 200-day SMA tested Premium
The Pound Sterling (GBP) crashed to its lowest level in a month against the US Dollar (USD), as critical support levels were breached in a data-packed week.
Bitcoin: No recovery in sight
Bitcoin (BTC) price continues to trade within a range-bound zone, hovering around $67,000 at the time of writing on Friday, and falling slightly so far this week, with no signs of recovery.
US Dollar: Tariffed. Now What? Premium
The US Dollar (USD) reversed its previous week’s decline, managing to stage a meaningful rebound and retesting the area just above the 98.00 barrier when tracked by the US Dollar Index (DXY).
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
I’m often mystified in my educational forex articles why so many traders struggle to make consistent money out of forex trading. The answer has more to do with what they don’t know than what they do know. After working in investment banks for 20 years many of which were as a Chief trader its second knowledge how to extract cash out of the market.
5 Forex News Events You Need To Know
In the fast moving world of currency markets where huge moves can seemingly come from nowhere, it is extremely important for new traders to learn about the various economic indicators and forex news events and releases that shape the markets. Indeed, quickly getting a handle on which data to look out for, what it means, and how to trade it can see new traders quickly become far more profitable and sets up the road to long term success.
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and selling pressure. Chart patterns have a proven track-record, and traders use them to identify continuation or reversal signals, to open positions and identify price targets.
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.
The challenge: Timing the market and trader psychology
Successful trading often comes down to timing – entering and exiting trades at the right moments. Yet timing the market is notoriously difficult, largely because human psychology can derail even the best plans. Two powerful emotions in particular – fear and greed – tend to drive trading decisions off course.