Wednesday, May 25, 2011

How can you make money?

Buying low and selling high or selling high and buying low is the base of making money in Forex. For example If you buy GBP against USD when each GBP is equal to $1.9554USD and then sell it when it is $2.0235USD, you have made a profit. I don’t want to focus on more details in this article and explain how the profits and the money you make will be calculated. I will talk about these topics in other articles.

But the big question is that how you can find out the best time to buy and how you can predict that if you buy, the price will go up and you will make a profit? This is the most important question that makes you a successful trader.

There are two methods to know the optimum time to buy and sell: Technical and Fundamental Analysis.

In technical analysis, you can predict the direction of the price using the the price chart analysis and also with the help of some special tools that are called Indicators.

Technical Analysis is a science and if you want to start working on Forex, you have to learn it properly, especially if you want to work as an intraday trader. It is not too hard to learn the technical analysis. If you are a focused and a serious person, you can learn technical analysis in a few months. There are a lot of free resources over the web that you can use to learn. There are some expensive training courses but those who sign up for them are not happy and believe that they have learned nothing. So don’t waste your money. If you are serious to learn, there are a lot of free resources over the Internet. You can also visit this weblog every now and then or subscribe for my RSS feed. I will try to share my experiences with you.

The other method is the Fundamental Analysis. This method is used to predict the future movements of currencies’ prices, according to the economic and even political situation of the world and important developed countries like USA, UK, Germany, Japan and… .

Fundamental analysis has a long term usage but good traders can predict the sudden changes that happen after releasing an important news about economic situation of an important country. For example when the news says that economic situation of USA is improved for 5% in comparison to the last month, USD will become stronger and people start buying it. So the value of USD will go up because of the sudden increase of demand. If you know the effect of the news on the price, you can take the proper position and make money. Of course there are two sides in this story which means if you take the wrong position, you will lose.