Essentially there are two ways to analyze and make forecasts in a market: Technical Analysis and Fundamental Analysis.

Technical Analysis is when a trader looks at past price patterns in order to analyze the market and make any future predictions. This is typically done by looking at charts such as the ones shown above and extrapolating price movement patterns from the past.

The graph below is an example of a typically used chart pattern known as a head and shoulders. This pattern was formed from October 2006 through November of 2007. Because of the nature of supply and demand and psychology of investors this pattern is suggested to predict downward movements in the markets, according to some technical analysis theories.

Technical Analysis patterns can be used over long time frames such as the one depicted above or over much shorter time frames.

Technical Analysis can be used stand alone or in conjunction with Fundamental Analysis.

The basic premise of fundamental analysis is analyzing and forecasting the market based on economic fundamentals similar to those described above: like interest rates, geo-political situations, economic growth and merger and acquisition activity in various countries. The Forex market reports on various economic events such as the key unemployment numbers, and supply and demand analysis. Various reports are put out on an almost daily basis. Typically the reports have a consensus before the report is put out. However when the report comes out it is sometimes not in line with the forecast. When this is the case for a particular currency pair, it will make a quick move to adjust, as the forecasted consensus is already priced in.

Below is an example of the ISM Manufacturing Report that came out higher than expected which strengthened the US Dollar causing the GBP/USD to fall at 10 am eastern time. Within 10 minutes the market moved over 35 pips. Keep in mind that this type of trading can be very risky as the market moves very quickly when these types of reports come out.

However, fundamental traders can also trade investment positions that are more long term. For example, a trader can believe that a certain countries economy will flourish over time relative to another economy and then he can take a position in that currency pair to reflect his/her economic outlook.

There are many different ways to trade Forex. And due to the fact that forex is a 24 hour a day market, people are able to find ways to participate that fit around their schedules. For example, you can use trading robots that are readily available on the internet to trade on your behalf or you can trade manually based on your own analysis as you watch the forex market yourself.

Although trading Forex can easily be a full time job most retail traders trade part time within their schedule, either after work or in the wee hours of the morning.

Some of the popular ways to trade forex are using trading robots that execute trades based on pre set parameters on your behalf, trading based on fundamental announcements and discretionary trading using fundamental and technical analysis.

There are some very strong benefits to using a robot. For starters it removes one of the greatest factors that negatively impacts traders. That factor is human emotion. Whether you believe it or not emotions such as greed and fear are the number one culprits to a trader’s demise. Imagine being convinced that your trade will become profitable and not walking away from a loss because of fear of taking a loss and greed of giving up money. As you trade, these emotions are there and they need to be continuously managed. A trading robot enters and exits positions on your behalf and you do not need to be there to press the button on losing or winning trades. This feature of a trading robot has a diminishing effect on human emotions. Another key aspect of a trading robot is that it is making trades for you while you are not in front of your computer. This way, in the 24 hours per day forex market, you are consistently making trades even when you are at work or asleep.

There are many robots available, some good and some that are very dangerous to use. We offer our clients multiple trading robots for the Metatrader 4 platform and many other stand alone platforms. When dealing with trading robots it is highly suggestible that you test them on a demo forex account before risking your hard earned money with the robot. Please keep in mind that people can make promises on the internet without any substance behind them.

Another way of trading is through a managed account. Where you have a professional trader trade your money along with others, then everyone that has invested in these trades will get a portion of the profits or take on a portion of the losses, depending on the percentage they put in. You need to be very careful when selecting a manager for your account and making sure they are qualified to trade on your behalf. Managers typically charge a management fee and performance fees in return for them trading your account. Most retail traders prefer to trade themselves and experiment with different dealing firms, currencies and trading styles. However, some traders prefer to use managed accounts in order to have someone who they believe is more qualified control their investments. Next >