CORRELATIONS:
A successful investor understands the correlations between the different venues that encompass the global financial markets. A thorough understanding of the ebb and flow of the bigger picture of things in the marketplace, gives a huge advantage to those who learn to recognize repeatable patterns that occur frequently, and are evidenced on the charts by the clusters of moving averages, swing highs, swing lows, trendlines, channels, candle formations, and fibonacci retracement levels for different time periods. Knowing the market correlations will guide you as to what currency pairs to hold, and for how long. The savvy investor studies the charts looking for trends to exploit.
When corrections (pull backs, retracements) occur, they will be signalled before the fact by the momentum indicators and candlestick formations, allowing investors to look for support/resistance levels to place strategic limit orders with a reasonable stop-loss sitting safely out of reach. They use the correlations between equities, bonds, and commodities to determine when a pull back will occur in the current trend. They also gain a feel for market sentiment by monitoring what the overall market is doing. Follow the money flow. Where is the money flowing? Are bonds being bid? What is oil doing today? Is the chart for gold bullish? What is the current market sentiment? Is there risk aversion or risk appetite. Understanding the bigger picture and exploiting it is achievable by diligent study and strict money management. In volatile times, very choppy swings occur around news releases and certain current events. During volatile times large drawdowns are common. This is unavoidable due to the sheer size and scope of the forex market. The liquidity is unbelievable to the novice investor and mind boggling at times. Therefore, small lot sizes with a pre-set stop loss and target profit level is necessary to prevent margin calls. Placing multiple limit orders at strategic entry levels will gain big profits over time with less risk to capital. The smaller lot sizes allows for drawdowns without risk of margin call. Money management is crucial to long term Forex investing, using correlations is the key to understand the bigger picture of the market and they allow investors to catch a trend and ride it with little or no risk.
A successful investor understands the correlations between the different venues that encompass the global financial markets. A thorough understanding of the ebb and flow of the bigger picture of things in the marketplace, gives a huge advantage to those who learn to recognize repeatable patterns that occur frequently, and are evidenced on the charts by the clusters of moving averages, swing highs, swing lows, trendlines, channels, candle formations, and fibonacci retracement levels for different time periods. Knowing the market correlations will guide you as to what currency pairs to hold, and for how long. The savvy investor studies the charts looking for trends to exploit.
When corrections (pull backs, retracements) occur, they will be signalled before the fact by the momentum indicators and candlestick formations, allowing investors to look for support/resistance levels to place strategic limit orders with a reasonable stop-loss sitting safely out of reach. They use the correlations between equities, bonds, and commodities to determine when a pull back will occur in the current trend. They also gain a feel for market sentiment by monitoring what the overall market is doing. Follow the money flow. Where is the money flowing? Are bonds being bid? What is oil doing today? Is the chart for gold bullish? What is the current market sentiment? Is there risk aversion or risk appetite. Understanding the bigger picture and exploiting it is achievable by diligent study and strict money management. In volatile times, very choppy swings occur around news releases and certain current events. During volatile times large drawdowns are common. This is unavoidable due to the sheer size and scope of the forex market. The liquidity is unbelievable to the novice investor and mind boggling at times. Therefore, small lot sizes with a pre-set stop loss and target profit level is necessary to prevent margin calls. Placing multiple limit orders at strategic entry levels will gain big profits over time with less risk to capital. The smaller lot sizes allows for drawdowns without risk of margin call. Money management is crucial to long term Forex investing, using correlations is the key to understand the bigger picture of the market and they allow investors to catch a trend and ride it with little or no risk.
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