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Forex Trading Strategies

  • Forex Trading Strategies

It is very important to make and test your trading strategies, and then trade according to your tested trading strategies in the format market. Trading strategies can help any trader reaching to the more accurate trading decision.

Day trading

The volatile nature of the Forex market makes it a very popular form of investment in the world. Thus, we can say that Forex trading popular across the globe. The big movements of the instrumental prices can be beneficial for the traders on a daily basis. This significant up and down in the instrument prices make day trading the most popular form of Forex trading across the globe. Mostly traders prefer day trading.

The basic purpose of day trading that you do not carry your trades on next day i.e. you open and close your Forex trades the same day.

Keep Monitoring Market

Though day trading is very popular but at the same time, it becomes very challenging strategy because it requires deep monitoring of the market. It becomes a difficult strategy particularly if you are newcomer to this financial industry. This trading strategy requires you to keep a good eye on the market and be very vigilant. Most importantly, you have to be able to make your moves quickly with the rise or fall of the market price of the instrument you are trading in. It actually helps you minimizing your losses and gaining your desired profits.

Of course, it is very difficult to be in front of computer screen throughout the day and even most diligent day trader may find it difficult on daily basis. Therefore, "take profit" and "stop loss", two very important tools are there to help you reducing your work load during day trading. Just use them and get rid of watching the market at every second of the day.

Risks Management

The concept of risk management is very simple and can be defined as - just set your least favorable price in "stop loss" whenever you open a trade of any instrument. It actually results in limiting your losses in case only if market does not go into your favor. Likewise, "take profit" works if the market goes exactly in your favor, it automatically closes your trade as soon as market price reaches your desired set "take profit" price. It ensures your profit even if market turns back against you after reaching your take profit limit.

Risk management is all about setting a goal in your mind that how much money you can spare to lose from any of your trade, if market against you, or how much profit you want to earn from a trade. This is all about controlling your trade according to your wish that definitely gives you great peace of mind. It is suggested that every trade you open should have a stop order at least even if you do not set a take profit.

Importance of Market Trend

Generally, traders take a longer term view on the movement of the market if they want to follow the trend. They take a longer term view on the rise or fall of the market. Traders who follow market trend, do not focus more on day to day market movements.

Bearish Market and Bullish Market

Bullish and Bearish are two terms of the Forex market. Traders who trade when market is rising are called Bullish Traders, and traders who trade when market is falling or is expected to go down, are called Bearish Traders. You will definitely go with buying your desire instrument if the market trend is bullish. Like you will go with selling if market trend is bearish. This Forex strategy is known as trend following.

The traders who generally follow the market trends are likely to hold their positions for a longer term i.e. for day and even some times for months.

Fundamental analysis

Mostly traders keep a good eye on the study of economic announcements of different economies and news. These are called fundamental analysis that generally impact on the market according to their intensity. Fundamental analysis include anything you have to add in the economic factors of an economy, for example current affairs, unemployment figures, conflicts, elections etc.

Fundamental analysis can help a lot in making right decision on what to buy or sell at what time.

Technical analysis

Technical analysis of any instrument is mainly based on very simple assumption that you may get the same situation of any particular instrument which had happened with that instrument in the past, means history repeats itself. To understand it more clearly, it should be said that the prices levels of any instrument which were in the past, are more likely to become prominent again in the future. The study of technical analysis is all about the study of charts of any particular instrument.

Mainly three basic indicators are used by traders whenever they want to predict market direction using technical analysis.

Trader and financial professionals widely use technical analysis because studying charts helps you turning market into your favor.

Support, resistance and trends

Resistance means the price level of any of your desired currency pair rarely goes up that point. Likewise, support is the opposite. In other words, the resistance and support can be described as the price of any currency pair of your choice rarely breaks through. These levels are generally the indicators for traders and they buy when price touches or come closer to support level and sell when the price touches or come closer to resistance. But breaking these trend lines usually set new resistance support levels.

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