The Best Forex Trading Tool
A dilemma that always comes up when trading in financial markets is whether to enter or give up. Some Forex traders use their “guts” when making important buying and selling decisions. This instinct or intuition that some feel is based on two basic emotions: greed and fear. Greed drives a trader to start trading and fear drives them to give up.
In any case, traders should use more than intuition to make these decisions. More knowledge is required to have a sound trading system that you can rely on in the foreign exchange market.
Traders need to know when to apply the right trading tools. This will depend on the type of market you are trading in.
Trend market
As long as there is a trend in the market, everyone has a chance to make a profit. Whether it is a downtrend (pattern of steady decline on the chart) or an uptrend (pattern of steady rise on the chart), this type of market is heaven for traders.
The most important principle to remember about trends is that trends tend to persist in one direction, either up or down.
Whether you are using descriptive analysis, fundamental analysis, or just your intuition, it is very important to check for the existence of a trend. Make sure you adapt your own trading system and trading tools to follow the trend.
Sideways
Trend-following systems perform very well in trending markets. Unfortunately, this is not the case with sideways movement. In the case of sideways guarantee, there is no room for profit because the fluctuation range is small. In a sideways guarantee or box range, the price range is basically narrow. Please refer to “ How to buy and sell box tickets ” for details.
Many traders succumb to the temptation to buy and sell boxes because they look relatively “safe”, but soon find out that it is already too late by the time the box is confirmed.
Of course, there are many trading strategies developed for these traders. These strategies clearly articulate entry and exit rules. The popular lowest price technique is also designed for this purpose.
Trend markets and sideways markets are the two main market types that traders need to know to apply the right trading tools and trading strategies. Read the article “ Checking Trends: A Beginner’s Guide ” on how to spot trends.
Example of a trading tool for trend-following Forex traders: ADX
ADX (Average Directional Movement) is the most used as an auxiliary indicator developed to check whether a trend exists. A value above 20 or 25 is a sign that a trend exists. What makes trend markets advantageous for trend-following traders is that they allow you to use trend-following systems that yield higher returns in either bull markets or bear markets.
On the other hand, an ADX value of 20 or 25 is a sign that the trend-following system is not working sideways. Momentum oscillators are helpful if a trader wants to continue trading in sideways trade .
Percentage
It should not be forgotten that trading in the foreign exchange market is based on uncertainty, not certainty. The general rule is to trade in the direction that is most likely to last.
If you follow this golden rule, your earnings are likely to increase. But you still need “luck”. When a loss occurs due to bad luck, you need to be prepared for the psychological “pain” of the loss so that your judgment is not clouded by the pain.
A perfect example of when there is no “lucky” in the market. Even if an uptrend or downtrend is likely to continue in one direction, a trend reversal can occur and you should be prepared for it.
A reversal pattern, which occurs frequently, can be used to find signals that an existing trend is ending and a new trend is starting in the opposite direction. Similarly, a trend indicator can give you an indication of the potential for a change in the direction of the market.
IronFX
Comment by Diletta
March 26, 2024
Awesome bonuses, good leverage. A few hiccups, but support rocks!