As a trader, you must 
develop a Forex trading 
strategy that will allow 
you to quickly identify 
flaws and make 
adjustments while
continuing to trade. A 
classic approach used to 
evaluate risks in the 
currency trading system 
is the inverted pyramid 
approach.  All macroeconomic 
factors that affect a chosen 
currency pair are a function 
of the top of the inverted 
pyramid. All technical factors 
are considered as you move down to the bottom of the
pyramid. Traders assign weight to different parts of the
pyramid. Purely technical traders may apply more weight to the
bottom of the inverted pyramid (upside down triangle) while
fundamental traders may apply more weight at the top.

In order to make use of the inverted pyramid you will need to
understand the macroeconomic factors that are a function of the
top of the inverted pyramid. These include international issues
that influence the global trading community. These types of
issues may be gauged from news reports and news feeds with
global coverage. News networks, such as CNN, provide up to date
coverage of terrorism, oil prices and other such issues.

In order to account for the technical factors that apply to the
pyramid, you will need to determine specifics and sediment in
the particular market within which you are trading and also for
any market that impacts the market within which you are trading.
You must decide the type of technical indicators that will be
used in your Forex trading strategy. Some traders rely upon
randomness and chance while others engage more complicated
mathematical computations to calculate weighted moving averages.
You must be able to develop and visualize a picture of the
market, which identifies events that are of importance to affect
the market. You also need to develop a general feel about the
market. News reports and specific market reports will assist you
in developing a picture of the market and also indicate of the
direction in which the market is headed.

You will need to determine which currency pairs are volatile in
relation to the macroeconomic environment and market conditions
that have been identified. You will need to have knowledge of
the market in order to identify and differentiate market
indicators from events that bear no real significance. Your
analysis of acquired data should indicate whether price
movements represent a trend or volatility in the currency
trading system. You will then be able to use this analysis to
narrow your options to trades that offer the most potential.

You must be able to set floors and ceilings in your technical
analysis to establish trading levels and then use those levels
in your Forex trading strategy. Technical patterns that indicate
the direction of trades in specific currency pairs should be
developed. Once you have narrowed down to a specific currency
pair for trade, you will then need to reexamine its market
sediment as it applies to the technical analysis. You will have
to identify entry and exit points for your chosen trades.