You can learn a lot through the various schools and courses available online, but there is an alternative with, I’d say, a higher information density and more reliably objective discussion around trading. It is, of course, Wikipedia. The information isn’t complete to take you from zero to trading, but it gives you a solid context from which you can base your trading in the future.
I’ll tie the most useful posts for general trading of FX, equities, crypto together, including basics, fundamentals, good technical analysis (TA) and questionable TA, as well as pure price action.
This is a sort of recommended reading list in approximate order, with my commentary.
Prepare to open many, many tabs. I’ll likely do a video tour to walk through all these.
Basics
See: Market Participants, Most traded currencies, Determinants of exchange rates, Speculation, Risk aversion
We’ll avoid futures for now, but will list for completeness. Retail traders can end up here when better funded.
Retain foreign exchange trading
See: section on Fraud. Before crypto and web3, forex was the wild west. Now it’s much more regulated and mature, and more of a mild west. In the UK, for example, your trading is protected up to ~£80k from rogue brokers. Not the case with crypto and “tokens”.
A different world sharing only technical analysis with forex. Stocks are available as CFDs, however, through most forex brokers. The S+P 500 and other country’s top stocks, usually.
Options in FX are typically used by larger players to hedge or create complex trading strategies. Not usually for us mere mortals. Requires “a bit of mathematics”.
Fundamental Analysis
You can refer to these for overall story, but day to day trading these without masses of data and high level analysis is difficult. I’ve known well trained people to do it, but it’s rare. It’s what’s taught in some ex-instutitional courses, but it doesn’t represent the majority of retail trading (and they’d argue there’s a reason for that, but I wouldn’t).
They are listed near the top because they have a huge influence on prices moving, yet the caveat is that they are a) public information, so somewhat priced in at most times, b) suited to different styles of trading over the long term with hedging etc., and c) to be avoided if planning to trade releases.
A brief one to consider when learning the basics - the VIX - will peak if the stock market is dropping. Market drops will have a knock on effect in Forex, risk-on flows, value of USD etc. You can find a chart for this in tradingview
Technical Analysis
This is the meat and potatoes of any equities, crypto and forex trading strategy. Unless you’re doing arbitrage or market making, which new retail traders won’t be, this is where the market operates for the most part.
Technical analysis The top level pages for this topic. A starting point.
These two, also known as PA and S/R, are all that some traders use in the markets. Marking out levels price stopped or reversed at previously, waiting till it is hit again and using the shapes and patterns in the candle sticks and volume to determine if another bounce is likely.
A brief rundown of how margin and leverage works.
Shorting in FX is not the complex story it is in equities/crypto, as currencies operate in pairs, so you are always long one side and short the other.
The bread and butter of my method - split the component parts of the pair and enter when they diverge. If converged, range trading. Needs an accurate enough measurement to work, and key levels marking out either through support and resistance, or whole numbers.
Similar to my currency strength method, statarb takes two diverging data points and expects their convergence - eveolution of pairs trading
These are supposed to show buying/selling exhaustion, consolidation of supply and demand, reversals of supply/demand etc. but have been shown to be dubious, at best, through rigorous testing. Still many traders use them as an indication of change in regime or confirmation of some other theory or “confluence” (traders like to sound smart while losing their savings).
The various types of trading. Scalping is missing, but is similar in criteria to the following, but done over the minute or hour timescales rather than days or weeks.
A study in 2019 showed that around 92% of trading in the Forex market was performed by trading algorithms rather than humans
It’s something to be aware of, and how these ultra quick reactions to news will beat humans trading the minute charts nearly every time.
Oscillators (technical analysis)
Overbought/oversold indicators - which many experienced traders say are conditions that don’t exist - are best for ranging conditions, when currency strengths are converged and the indicator typically shows where price has hit the top of the range. This can be seen by eye without the indicator. They can lead to false signals in trends.
Similar to the more modern and potentially useful Volume Profile. VP forms a part of my strategy when set to “range, last 10 days”, showing “volume nodes” where lots of trading volume has been transacted recently.
Category: Technical indicatprs
Moving Average: Often the first indicator everyone learns. Bear in mind: price doesn’t “move towards the moving average”, it just stops going in that direction eventually and so the average draws in. Subtle but important distinction. People initially like to trade crosses of two moving averages, one fast, one slow, but this gets caught out quickly in ranging/non-trending areas. Comes in simple, exponential and various weighted and smoothed versions. EMA/SMA most common. Very similar.
An average with real-world significance as institutional traders are often scored or checked for how close their entries were to vwap, as a benchmark for fair price. It is fair because it accounts for a) the current day only, and b) current volume being traded for that session. This occurs most in equities, however given the daily resetting nature of vwap, it also applies to other markets. Available on most platforms in one form or another.
A shifted moving average system that shows trends starting and ending, developed in Japan in the 1930s, published in 60s. The basics can be easily recreated with 2 MAs shifted 26 periods over - it’s not magic, but it is a nice filter.
These are normally manually drawn to encapsulate a trend, its momentum and it’s outer edges. Trades are taken from the edges, long from the bottom, short from the top, depending on the overal bias on higher timeframes and wider trend lines.
Technical - to be treated with caution
Chaos theory, golden ratio, wisdom of markets, self-organising criticality, they all come into play in this section of the weird and wonderful.
Based on the “golden ratio”, it measures % distance from peak to trough of last move for expected pullback distance - 61.8% and 38.2% considered special, where studies have shown an everage of 50% per pullback is to be expected. Meaning pullbacks after pushes up or down are expected to hit half way up before continuing again. If there is any benefit to it, it’s that it keeps you waiting for a safe enter to re-enter a trend, avoiding getting stopped out on the pullback.
Fibonacci on steroids. Circular version of above. If any benefit, it shows slope of trend, steeper = stronger.
This one I actually have a bit of optimism over, as it’s been found in a range of systems, where state settles (ranges) before breaking down again (trend) like sand forming a pile then avalanching. Phase transitions. Ties in to fractals and power laws. This has been applied to coronovirus in latest studies. How could we know if a range is going to collapse? Ticks traded on average? Above average volume just before break?
Yes, really, people do this. Moon cycles, the lot. Obviously hedge funds are not run this way. At least not that we know of. Who knows what they do in the dark towers at RenTec.
What’s not yet on Wikipedia:
- Specific strategies. Breakout to trend, reversion in range, how to tell.
- Hedging vs scaling in and out, exposure, scaling at better, worse and average price. Account size impacts etc.
Skim through the above and drill down into anything that takes your interest. Find me on Discord or Youtube to discuss!