Trading Forex: Planning Your Strategy by Imran Mukati
The Value Of Knowledge
In the final part of this introductory series on forex trading, we look at some important aspects of trading strategies and how you can develop one. We’ll also look at some sources of data and potential indicators to use in forex trading.
Planning your trading strategy requires a thorough understanding of the market you wish to trade. If you’re going to trade the forex markets, the first step is to understand how certain markets are interrelated. One of the most important relationships to watch in the currency markets is how the various pairs and crosses are correlated with price movements in commodities especially. A correlation is, as the name tells us, a relationship between two things. In the financial markets, correlation means that an equity, currency pair, commodity, or market moves predictably along with another. Correlation can be positive, in that when A moves up, so does B; or it can be negative, meaning that when A increases, B decreases (and vice versa).