Believe it not, improving your overall trading strategy in both the traditional securities and exchange marketplaces as well as in FX trading doesn't necessarily take years of practice. Within two minutes or less, you can quickly reinforce particular elements of your overall approach, ensuring that you are more likely to reap the lucrative financial rewards you seek.
In foreign exchange, or FX, trading, one of the most powerful indicators of future market behaviour is the SSI, or Speculative Sentiment Index. Developed by polling the ratio of how many FXCM traders have adopted long and short positions on each major pair, this index can provide a myriad of powerful information for casual traders looking for a heads-up on future market swings.
If the SSI is a positive number, meaning that there are currently more retail buyers than sellers in the marketplace, it's best to look for trading signals to sell. If the SSI falls into negative territory, it's best to look for trading signals to buy.
Another effective indicator is the risk:reward ratio. Studies have shown that many traders incur financial loss in the marketplace simply because they sell lucrative positions too early and hold onto losing positions for extended durations when they should be selling. In order to create a positive risk:reward ratio in your own personal FX portfolio, it is advised that individuals set their limits at least twice as far as their stop losses. Although this isn't a sure-fire guarantee of success, it may help create a more target-rich environment for ambitious FX traders.
Although it's easy to get swept up in theories and rhetoric, it is advised that all FX traders practice their new strategies in a simulator environment before adopting leveraged positions. Not only will this offer traders the time and information needed to fine tune their strategies, it will ensure that damaging financial losses are not incurred due to simple, careless mistakes. A number of free FX simulators can be found around the internet, many of which are offered by large exchanges and educational providers. Although veteran traders may not require this type of “practice”, those who are new to FX trading are strongly advised to explore a variety of strategies in the simulator environment.