The reliability of trending data

June 25, 2009 by admin  
Filed under Forex Tips

When making an investment in the Forex market – or indeed cashing out of one – it is common to use the trending patterns of the currency that you are trading. This is data that has been collected over a period of time – in many cases over the course of years, even decades. Knowing how to read the data effectively can make you a lot of money, or save you from making a catastrophic loss. The way that you go about investing can make a big difference, and it is advised that you do not ignore the lessons of history. However, can it be said that the historic data is foolproof?

Well, the only true answer to that question is “no”. Very few things in this world are 100% certain, and anything that is so certain is not going to be a sound basis for investment because it will never move in terms of value. As far as is possible, the most popular methods of data analysis within the Forex market can be very reliable and aid a profit strategy, but you must accept that they carry a certain risk. That risk is reduced the longer a period of data collection continues. However it is important to be aware that the lower the risk, the lower the potential reward becomes.

It is fair to say that any sound strategy needs to have a basis in data. The more data you have, the more comprehensive your strategy. You need to be aware at the point of investment however that there is a chance your strategy will fail, no matter how much data went into creating it. This does not mean the data was bad, just that on this occasion the market won.

Learn the lessons of history – good and bad

June 25, 2009 by admin  
Filed under Forex Tips

The world in which we live is constantly changing. Physically, morally, financially, things which we held to be true ten years ago have in many instances ceased to be the case. However, this does not mean that we cannot learn from the past. After all, a wise man once said these words, or something close: “Those who cannot remember the past are doomed to repeat it”. In other words, unless you learn from your mistakes you stand an excellent chance of making the same mistakes again. In fact, one could go further and say that you should also learn from the mistakes of other people. It is true that you can learn much more from a mistake than you can from something flawless.

It is, then, an excellent idea to keep a watch for the same data cropping up time and again in the Forex market. Where before you might have been led to believe that a certain market was going a certain way, and followed what the data suggested, you may well have found that that action was ill-advised. When the conditions reoccur you should be highly cautious of reacting in the same way – the potential drawbacks for you could be just as negative, if not more so.

It is much better for you to do your research and be initially cautious when it comes to trading on the market. After a while of intelligent conduct you may well have earned yourself enough money to put by for security, and let your instincts dictate your actions for a while to see if they make you as much money as you expect.