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My last article talked about the forex trading strategies that will work over time for individual traders, so this day we will dig deeper to help you discover and devise a strategy that will open your door to financial success. Once you’ve decided whether you’re a scalper, medium or long term forex trader, you can begin building the framework of your forex strategy. Since we want to give you the highest odds of making a profit, this article will focus on the odds, rather than forex trading strategies that rely on automated trading systems.

The medium term trader has the least amount of capital to begin with, and the fewest opportunities to execute trades, which mean his forex strategy will rely on how well he interprets the technical information and the decision reached. This sounds like a lot of work for not a lot of pay off, but the trick is finding those times when the majority of the forex indicators point in the same direction. A patient trader will move until the signs lead him to profits.

Choosing Forex Trading Software – Now that you comprehend where you begin in terms of choosing a forex trading strategy that will work for you, it’s time to select trading software. There are many trading programs from which you can choose, but until you feel comfortable with the technical ins and outs for forex, select forex trading software that grants a free demo statement so you can practice the forex strategy that’s right for you. Before you choose, there are a few basic gotta-haves of any forex trading software:

1. Ability to display (at least) three distinct time frames at the same time. 2. Ability to plot common technical trading indicators.

Set up Forex Indicators – Once you have selected forex trading software, it is time to begin setting up the indicators. The forex indicators you select should help you implement the forex strategy you wish to employ, medium term if you have tiny capital, and short or long term if you have the capital to risk. Forex trading indicators show you, in graph form, the price at a particular point in time. In order for you to decide how to act, you will set up several different indicators and move for all of them to point in the same direction. This sounds like an simple strategy, and with patience and skill it can be.

Keep in mind that the more forex indicators you set up in your forex trading software, the more reliable your forex strategy will be. Conversely, the more indicators you have set up, the fewer opportunities to trade will arise. The key when setting up your forex indicators is deciding if you want a reliable trading strategy that works but provides fewer opportunities, or one that is less reliable but creates more trading opportunities. Medium term traders will focus on reliable but infrequent trades to make a profit.

When you devise your forex strategy, make it for the capital you have now, not the capital you plan on having in the future. You can always change your forex trading strategy when you need to.

Fundamentals move currency prices and this is obvious but if you try and trade the news you will lose it is incredibly difficult to trade news stories and win – but if you know how to use fundamental analysis in your trading correctly, you can make large profits.

Let’s begin with a simple equation for market movement

Forex supply and demand fundamentals + Investor perception = price

Millions of trades see the facts but they all draw their own conclusions from what they see.

Humans are not logical, they are motivated by the emotions of greed and fear and guessing the impact of the fundamentals is the hard bit.

Consider this rather startling fact:

In the last 100 years the amount of winners in forex trading remains the same about 5% and 95% lose.

This is despite the fact that we have seen large advances in forecasting, personal are more advanced this day than the one that landed man on the moon and we can get the news instantly at the click of a mouse.

It hasn’t helped why?

The answer is simple humans determine the price of what something should be. While prices tend to move in line with the long term fundamentals prices spike away from clean value as greed and fear take hold and volatility takes prices in the opposite direction of the fundamentals a lot of the time.

It’s a fact that markets collapse when the fundamentals are most bullish and rally when they are most bearish – this is human psychology at work.

You can still use them to back up your analysis of the long term trends – but you should really use forex charts to look for price spikes away from clean value.

These are simple to see on a chart and then you can time your entry with your trading signal to take advantage of the spike.

It’s a fact that throughout history, that strong price spikes are temporary and eventually prices start back to clean value – ALL you need to do is spot them.

News can also be used to spot contrary trades – if bullish news fails to near a market higher and bearish news fails to near it lower, this is warning you of a price change.

Today, trying to guess the impact of apiece individual news story is impossible, as the news is discounted instantly and you have no chance of winning.

Forex charts take care of this for you.

All forex technical analysis does is adopt that all the fundamentals that are known show up instantly in price action. The technician is only interested in letting the chart tell him where prices are going next, not the reason and the bonus is – the chart shows human psychology to.

If you want to use the news then go ahead – but always use charts to time your entry and look for news stories that don’t have the affect most traders thought they would to generate contrary trading signals.

There’s an old saying:

“If you can hold your head when everyone else is losing theirs you probably haven’t heard the news”

In forex trading you have but you are looking at the news in a different way to the majority and know how to use it to make forex profits.