Malaysia Forex Trading Theories:

Which Do You Align With?

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Malaysia Forex Trading Theories: Which Do You

Align With?

www. teletrade.my

Theory and practice are very different things when it comes toMalaysia forex trading. There is a common belief among many people that foreign exchange rates have to be determined by relative prices of similar items between two countries which are referred to as purchasing power parity.

According to this theory, when the prices of items in a country are going up because of inflation, the exchange rate has to go down in order to maintain parity.

Malaysia Forex Trading Theories: Which Do You

Align With?

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But this is infrequently true in practice since a currency can trade either above or below its purchasing power parity value for a considerably long time.

Charles Dow, who is among the pioneers of technical analysis, also developed theories for market movements.

He came up with a number of assumptions concerning what goes on in the forex market. In one of his theories, he states that the forex market comprises of three trends.

Malaysia Forex Trading Theories: Which Do You

Align With?

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He observed that no price moves in a straight line either up or down but many traders usually expect it to. The traders think and hope that a certain trend will stay like that forever.

According to Dow, the trends he established to exist in the forex trading market include the primary, secondary and minor trends.

The primary trend refers to the main trend in the forex trading market which is mostly seen on longer-term charts, for instance daily or weekly. The primary trends usually last for years and they are either rising or falling.

Malaysia Forex Trading Theories: Which Do You

Align With?

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When there is a rise in the trends, it signifies that the market is making higher highs in prices as well as higher lows. When there is a fall in the trends, it means that the price in the market is making lower lows and lower highs.

Even though traders mostly use longer-term charts when determining the primary trend, it is usually relative to the time-frame that you are using. For instance, if you are using a minute chart or one minute options to trade, the primary trend will most likely be a 5 or 15 minute with a day or two of price data.

Malaysia Forex Trading Theories: Which Do You

Align With?

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A secondary trend is basically a corrective reaction to the primary trend that usually retraces approximately 20% to 75% of the last move made in the primary trend.

The corrections or secondary trends continually occur relative to the primary trend. The secondary trend will differ for short term trades and longer-term trades.

When finding a secondary trend, you have to look for the dominant primary trend depending on the time-frame you are trading on.

Malaysia Forex Trading Theories: Which Do You

Align With?

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The minor trends on the other hand are simply fluctuations that occur within both the primary as well as secondary trends. The fluctuations are commonly referred to as market noise since they mainly draw your attention from the real profit potential provided by the primary as well as secondary trends.

Therefore, whichever time-frame you are trading on, your focus should mostly be on the primary and secondary trends. Do not bother trying to profit from minor trends since they are mostly random.

Malaysia Forex Trading Theories: Which Do You

Align With?

www. teletrade.my

If you want help on Malaysia Forex Trading, please contact Teletrade or visit us at http://teletrade.my/

Malaysia Forex Trading Theories:

Which Do You Align With?

Brought to you by: http://teletrade.my/