- Forex trading and investment: what options are there?
- What is a currency trading strategy?
- Trading strategy - manual or automated?
- 5 various currency trading strategies
- Conclusion: The perfect currency trading strategy does not exist
- Top books on the subject
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Forex trading and investment: what options are there?
Yes, there is a proven way to maintain disciplined trading behavior, using one or more currency trading strategies.
What is a currency trading strategy?
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Investopedia defines one Forex trading strategy as a techniqueto make purchase or sell decisions for a currency pair at a specific time. A strategy usually consists of trading signals, which are the trigger for buying and selling decisions.
Trading strategies can be based on fundamental analysis, technical analysis or news driven events. Because different trading strategies work differently and for different people unique suitable, there is no single strategy that can be said to be the best or the most profitable.
Trading strategy - manual or automated?
Forex trading strategies can be either manual or automated.
- In manual trading, the movements of currency pairs are monitored by one person. The goal is to identify trading signals that tell you if the currency pair you are monitoring is to be sold or bought.
- On the other hand, in automated trading the trader develops an algorithm that not only identifies trading signals but also executes trades.
5 various currency trading strategies
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Most of the traders used today Currency trading strategies However, they fall into one of the following 5 types:
Forex Trading Strategy Type #1: Daily Trading
As the name suggests, include Day trading strategies leaving trades before the end of the day. The price bar graphs are usually set to one to two minutes and the trades last only a few hours.
The main advantage of day trading is that it reduces the risk of loss due to large overnight fluctuations in the value of currency pairs. The strategy is ideal for beginners. A good example of a day trading strategy is the 50 points strategy per day.
scalpingStrategies involve holding trades for a few minutes to beat the bid/ask spread for a small profit. Scalping typically uses technical analysis tools, and trading is based on real-time analysis of currency pairs.
There are manual and automated forex scalping systems. In a manual System the trader identifies signals through visual inspection and interprets them as either buying or selling opportunities. An automated scraping system uses software for technical analysis and interpretation of trading signals. Technical analysis is timely, giving forex scalpers real-time charts to make trading decisions. Forex scalping allows the trader to make as many trades as possible in a single day. Try im Dax30.
Forex Trading Strategy Type #3: Swing Trading
Swing Trading is considered a medium-term currency trading strategy. The trader holds trading positions for several days to make small profits from short-term price changes of currency pairs.
Intraday trading creates a lot of noise in currency movements. Swing traders try to set up trades so that their position is not affected by very short-term movements in the currency market. In other words, swing trading filters out unpredictable price fluctuations and enables traders to set up desired swings at low and high levels over a longer period of time.
Forex Trading Strategy Type #4: Trend Trading
As the name implies, trend trading strategies follow the trend. Current currency developments can be reliably used as indicators of the direction of future currency prices. The trader uses the price direction indicated by the trend to select entry and exit points for trading.
It is worth noting that trend strength is paramount when using trend trading strategies Significance is. Various tools are used to assess trends, including the moving average indicator, relative strength indicators, Stochastics or directional indices.
Currency Trading Strategy Type #5: Position Trading
This type of forex trading strategy is based on a long-term evaluation of currency pair movements. Position trading aims to maximize profit due to sharp changes in exchange rates. The trader constantly analyzes end-of-day charts and uses his Background about the market fundamentals, to make trade decisions.
Since position strategies can play out over years, a lot of patience and Discipline demanded by the trader. This also includes tracking long-term macroeconomic trends for different economies. Therefore, position trading is more suitable for experienced traders.
Conclusion: The perfect currency trading strategy does not exist
There is no currency trading strategy that is guaranteed to work all the time. A determined trader should familiarize himself with a variety of strategies to make sure he has a collection of useful trading tools to meet the challenges of the ever-changing marketplace. It is also important to note that general market information should not be used as investment advice.
Make a detailed assessment of any forex trading strategy you intend to use before actually applying it to trading. Contacting a forex trading advisor would also help you get a good one decision about the type of trading strategy to use.
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