How do you know when to buy or sell a currency pair?
Trading in the Forex market is not easy. You need to have a lot of experience and knowledge in this area to execute any financial transaction. In reality, trading on Forex is like buying or selling currencies on a trading platform. The Forex market allows you to buy and sell currencies, and also speculate on exchange rate differences. There are several possibilities that brokers offer so that trader can buy and sell. However, it is not a question of buying and selling of currency at any time. There are ways to make these purchase or sales decisions. Only in this way can the trader hope to make money by investing in the Forex market.
Specifically, the trader will have the option to buy or sell a currency pair under identical conditions. The principle is to invest a sum of money on the future evolution of the currency balance (e.g., Dollar, Euro), with the goal of monetizing either the scenario of an increase in Euro-Dollar parity or the scenario of a decrease in the Euro Dollar parity.
This is the reason why it is vital to know when to buy or sell a currency pair. In this article, you will get the opportunity to have an idea of the perfect time to take this type of action on the Forex market and hence make a better investment.
Monitor market trends
The best way to know when to buy or sell a currency pair is to be observant to market developments. The trader must be able to analyze, read and interpret the indicators. In this situation, only resistance and the notion of support remains one of the best-established methods for its efficiency and simplicity. Indeed, these are two indicator
thresholds on the evolution curve of the Forex market:
The support is the threshold under which the price of the currency will not pass;
The resistance is the threshold above which the price of a currency cannot pass.
By calculating these two indicators, the trader will be able to acquire vital information, which will enable them to establish a winning strategy. When the resistance level is attained, the trader can optimize from a sales position. And conversely, the buying positions are favorable, when the level of support is attained. These levels of resistance and support of the value of a currency are formalized by graphics, which will give an idea of the ongoing trend of each currency.
To draw the resistance and support curves, the trader must join the high points and low points on a horizontal line, which will shape the support and resistance lines. Certainly, it is the reading of the lines that will give some clues to the trader, to help him decide when to: buy or sell. Indeed, the higher the high and low points, the harder these lines are to cross, and the values between these thresholds will change. If the currency approaches the resistance line, it is a sell signal. However, if the line is much closer to the right of the media, it implies that it is a buy signal.
Hence, it is important to analyze the market news regarding the price of a currency pair to make a decision on the right actions to be taken on the Forex market.
Entering the currency market effectively
The key is to discern how to identify the right moments to enter the Forex market. For this, the trader must know how to analyze market trends, to help him grasp the evolution of a currency over time. It is a question of detecting and anticipating a reversal of the trend, to improve the results