Gathering the knowledge about Forex trading may be easy, but putting it into action with success is somewhat tricky. Experienced Forex traders around the world develop strategies that can benefit others. Nonetheless, it is evident that these strategies stand on their own trading styles.
You can create or choose a strategy and modify it according to your trading style. Forex trading is a global and liquid market offering impeccable opportunities to investors, traders, and banks to improve their forwards, profits, and trade volumes.
The leading currency pair on the Forex market is United States Dollar/ Euro. It is the most liquid currency pair in the entire Forex market. Following this pair in the second place is The Great Britain Pound/ US Dollar currency pair.
To generate maximum returns and profits, devise strategies that will not only help with planning but also remind you to monitor progress. Below are some Forex trading strategies.
1. Day Trading
This trading method enables you to open and close all trades in a single day. While its validity extends to all markets, Forex is the place for its major use.
You stay active and monitor all the currency trading throughout the day. You do not leave any trade active or open overnight in order to control the risk factor. Develop your trading plans for the day using a half-hour or full-hour time chart, as many day traders do.
Usually, economic news generates trading ideas. The interest rate, statistics of economies, and GDPs of respective economies have an extensive influence on the Forex market. Even elections can affect the currency trading markets.
When you execute a day trading strategy, you minimize risks by setting a “daily risk limit.” Most day traders lean to a risk limit of 3 percent. The purpose, however, of daily risk limits is to secure your capital.
Day trading also entails certain risks. Firstly, “day trading” is expensive. The FINRA regulates you to have a hefty balance of is $25,000 in your brokerage account to keep trading.
Secondly, the idea behind day trading means benefitting from fluctuations of different companies’ stocks in “a day.” Therefore, in a bad guess or prediction of a stock’s price, you may lose all your money. Nevertheless, it can generate huge profits.
2. Scalping Strategy
The scalping strategy works differently from “day trading.” In Scalping, traders buy up large volumes of stock trades, which, due to minor market fluctuations, generate smaller gains.
Keep in mind that the small gains are per each trade. Therefore, profit volume is large. Small variations in the Forex market attract scalpers to exploit minute increments. The major setback of this trading method is that it requires immense time because you have to keep analyzing market trends and charts to discover potential trading prospects.
3. Position Trading
Position trading refers to keeping the volume of trades open for long periods of time. This means you will be open to many trading opportunities, despite plenty of room for losses. Position traders tend to keep firm knowledge of the fundamentals that might influence the Forex market.
These factors relate to the policies of central banks or even political and economic changes. Position traders will avoid stress because their trades stay open for lengthy periods, almost an entire fiscal year. Therefore, minor variations in the market don’t distract them.
As patience is the key for this trading strategy, you can gain the expertise of the market through carefully learning the fundamental factors and by spending a couple of hours every week. You might need more capital to invest, but profits via this method provide more compensation.
The strategies you choose to trade and how you modify them most certainly depends on your trading style. Take your time and learn about key factors that help choose strategies such as time-frames, position size, and trading opportunities. In the long run, they help you become a successful Forex trader.
You can opt for day trading if you want to generate satisfying profits in a single day. However, do not forget the risk of bad guesses when evaluating the potential of a trade. Consequently, you can opt for scalp trading if you want to spread the risk over a large volume of trades and benefit from small increments on each trade. Or, if you have the patience and economic background, you can opt for position trading: it will require you to keep your trades on the market for longer periods and benefit from long-term market trends.