This article looks at the technical trading that you can do on the foreign exchange market.
There are a lot of traders who use technical trading on the foreign exchange market. If you are one of these traders then you need to consider the way that you are going to trade. It is possible to trade reactively and proactively on the foreign exchange market. You should consider what this trading is and how it will affect what you are doing on the market. You should also consider how safe the trading will be and what this means for you.
What is Reactive Trading on the Foreign Exchange Market?
Reactive trading is the type of trading that most technical traders will be using. When you trade reactively you are going to wait for the movements on the market and only trade when you are sure that you should. This is the safest type of trading because you are going to confirm the movement before you trade on it.
When you trade technically you are going to look at the technical indicators or the price patterns. The way that you trade reactively will vary depending on the technical analysis you are using. If you are using price patterns then you will wait for the pattern to fully form and then confirm the movement with the indicators. If you are only using the indicators then you are going to wait for the confirmation indicators to tell you that the movement is viable for trading.
When you wait for confirmation you ensure that you are only using trading opportunities that will give you a profit. This is what you should do with all trading. However, there are many traders who feel that this trading limits the profits that you can make. As you wait for confirmation you are going to be losing some of the movement that you could be trading on.
The Technical Proactive Trading
There are a number of traders who will look at proactively trading on the forex market. When you do this you are not going to wait for confirmation about the movement. This is a riskier type of trading as you have no way of knowing if the movement you are trading on will actually be viable. This chance you are talking could results in major losses if you are not careful.
When you trade on the price patterns you will not wait for full formation before you trade. This means that once the pattern has formed enough you are going to trade on this. If you are using the head and shoulders pattern then you will open you trade as soon as the second shoulder is formed.
When you use the technical indicators you are not going to wait for the confirmation tools. Proactive traders often do not have confirmation tools in their trading arsenal. Once the indicators tell you that you can trade you will.
The lack of confirmation that comes with this trading is very dangerous. Each trade that you open can bring major losses because the movement is not viable. However, proactive trading does offer greater profits which are what some traders are looking for.