The forex market offers many opportunities for both profit and loss. In order to have a chance at creating regular profits, traders need to choose a strategy and stick to it for consistent trading results.
Below are 5 strategies used for trading forex.
A momentum trading strategy is one where a trader looks to identify a strong momentum in the markets and follow this momentum. This strategy is ideal for active traders who can watch the market every day, or those that can program EA’s to detect movements and automate their trades.
US Non Farm Payrolls is just one of many economic figures released by governments around the world every day. Some traders use strategies to trade on the forex movements when these figures are released, acting fast to react to the often-sudden movements caused by the news release.
Scalping is a technique for making quick trades and taking small profits regularly, many times over each day. Scalping can be an exciting and high octane way to trade but traders must keep tight stops to prevent being wiped out by sudden negative moves against their positions.
Many traders take an active interest in technical analysis. This involves studying forex charts to identify patterns that indicate an opportunity to trade. Common opportunities include support and resistance levels, Fibonacci levels and moving averages.
There are many macro economic factors like interest rates and elections that can impact the long term movements in currencies. Traders that do not have time to actively trade the markets, or those looking to include forex in their long term investment portfolios, may prefer this strategy.
No matter what trading strategy you choose, it can be profitable if the right opportunities are taken - but this is only the case if proper risk management is used. No matter the strategy used, all traders should have stop losses, appropriate leverage levels and only trade with funds you afford to lose.