How to Make a Profit in Today’s Forex Markets

There are two approaches to trading currencies, fundamental analysis of relative currency value and Forex technical analysis.

Modern Forex technical analysis works because it is based on statistics, the history of the market. Signals that have a high degree of reliability are used to predict the next market move. This system works the best with high trading volume and liquidity. Thus the best way to use Forex technical analysis is with major currency pairs.

Technical Forex trading is commonly used to make a profit when trading major Forex pairs such as the US dollar, euro, Swiss franc, British pound, Yen, Canadian dollar or Australian dollar. Fundamental analysis can be applied to any Forex pair and requires that the trader is familiar with local economies, fiscal and monetary policy, trade balances and global economic factors like the prices of commodities and how they affect individual countries. If you have a specific interest in and knowledge of smaller economies this can be a good place to make money trading Forex but it is essential that one have accurate and timely information which is more commonly available with major economies and major currencies.

Long Term Trends

For years the US dollar fell year by year against the yen and other currencies. A safe bet was always to place calls on the yen with the dollar as this resulted in a profit when the dollar went down again and again. However, this is not necessarily the case today. The dollar fell steadily when the Federal Reserve instituted quantitative easing and drove interest rates down. But then other major economies followed suit and it became a Forex race to the bottom. Now the US has been slowly raising interest rates which drove up the dollar until traders decided that rates will not go up all that fast. Reading these longer term trends correctly can lead to trading profits.

Minute by Minute Forex Profits

Markets repeat themselves and if a trader reads signals correctly he or she can enter and exit trades with a profit within hours and even minutes. A time honored and easy to follow approach is to use Candlestick charts for trading Forex.

Japanese candlestick Forex charts provide traders with two kinds of information. One can see at a glance if one currency pair is more volatile than other. And one can use the live Forex signals superimposed on Japanese candlestick Forex charts to anticipate profitable trends and reversals. Thus Japanese candlestick Forex charts help traders pick the most profitable to pair to trade and they help traders profit in day to day trading.

This is a very visual approach to trading. The candle is a vertical line on a chart. It shows the opening and closing prices of a Forex pair during the trading day. White candles mean an up day and black candles mean a down day. Lines extending above and below the candles are called shadows and show the entire trading range for the day. Single day candles or groups or two or three can be highly indicative of where the Forex market is going next and can be profitable guides to trading.