Forex Trade Research
Forex Trade Research
I've tried to find articles highlighting the importance of forex trade research but they are far and few in between. This lack of articles is in itself a little disconcerting. Trading, by its nature, is not static since the market ebb and flow is based on new information that's regularly introduced. This price movement is primarily a result of the news, both past present and expected future. Consistent research is, therefore, necessary to be prepared for opportunities that may arise at any time.
Why Should I do any Forex Trade Research?
The closest articles I could find on trading research were those on planning for your trades. This focus is what is missing in many forex traders mindset, the need for current ongoing information on the markets. I combine both technicals and fundamentals in my trades. Ongoing research is needed for both.
- This research includes keeping up with present news, knowing the old news for a giving currency, knowing critical points from previous central bank statements, knowing new support and resistance levels, knowing overbought and oversold regions, and being aware of round number levels.
- Without being aware of most of this information, you don't have an understanding of which way a currency pair may move and what its possible highs and lows are. This information has to be current and clear to you. Only with up to date information and information that you're clear about will result in you making a higher probability trade.
- You can feel in your gut when you've done enough research. Most of my drawdowns have happened after I spent insufficient time researching and making notes. Right decisions are a result of useful information, and lots of it so you can contrast and compare to chose the best response.
Forex Trade Research and Certainty
A sense of certainty is an essential part of trading since it determines whether you enter a trade or not, the amount you should risk, whether you continue to hold or not. A sense of certainty is a result of lots of evidence or confluences when lots of evidence comes together to suggest the same conclusion.
This confluence might be several news articles reminding the reader of an upcoming expected rate hike, a high GDP number suggesting a rate hike and an ongoing trend supporting the direction of the likely rate hike.
When this sense of certainty is sought after, traders tend to become better managers of risk since they begin to favor trades that have a greater chance of working out. This sense of confidence is just another way of saying traders will tend to choose higher probability trades.
See the link provided above that relates to picking higher probability trades. This sense of certainty will also be a result of having more ideas to work with. The more ideas, the more you become an independent trader capable of trading consistently well.
The Amount of Research Needed
Conservatively, I would expect a trader who's successful to be spending at least an hour a day on research after he's completed his training. This dedication may seem tedious but in fact barely sufficient because much time is spent wading through material that is uninformative and long-winded.
However, given enough time, ideas will start to form as to what various opportunities exist in the present market conditions. These inspirations can be improved upon by approaching the research material in a business-like manner.
The best way to retain information is to take notes and create questions related to the notes taken. These questions should include what-if scenarios. For example:" If the ECB speak about the economy improving I will....." This way you understand your options in advance and are more likely to carry through with a plan correctly.
This understanding is just an extended version of planning before you trade except with research we're dealing with a more fluid plan as the market information changes on a regular basis. The analysis should be written down just as a preconceived trade plan because in doing so you are more likely to follow through with conviction.
Sources for Forex Trade Research
There are various sources for your research, the first source for the technicals being the charts. The sources for the fundamentals require more effort and time to read and decipher. These sources include all articles listed on the forex calendar, squawk services such as Ransquawk (which includes weekly reports, bank reports, daily market analysis, and live news events ), Bloomberg, Reuters, Forex Live, Fxstreet, Forexcrunch and more.
Probably the best source that I use for news and fundamentals is Ransquawk. It includes live news for the Euro, American and Asian sessions. It's continually updated in real time so that if there are any surprise news reports, they're on it right away.
The squawk is a live voice that comes on during scheduled news events as well as surprise events. The second most used source is Bloomberg. Unfortunately, Bloomberg articles are no longer free. There's a subscription charge unless you can find a way to access it with new IP addresses after each trial session, not that I'm advocating this.
Research comes under many forms and is included under the more general heading of preparation and planning. Of all the different kinds of preparation, reading and keeping up with news articles is the most tedious and yet most constructive.
It leads to many trade ideas that can be then correlated with technical entries allowing for higher probability trades. There is a relation between the amount of time one spends on research and trade success. The longer one spends researching; the more refined the trades become and the higher the success rate.
Research leads to not only more trades to select from, but it also leads to becoming more selective with your trades and therefore less risk-prone. It leads to more easily being able to say no to some trades that you may have impulsively conceded to in the past.
Research progresses more efficiently if you write what you've learned down on a piece of paper. You accelerate your learning. The effort will pay off.
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