forex-trading-strategies

There is no limit to the amount of information you can learn about the Forex Market. However deep your knowledge is, you will still have something yet to discover. Things change over time. Rules or established ideas can change for different reasons. Factors that, in the past, would have had little impact on the price of a currency pair can also come into play. Also, as the market is international, breaking world news, an economic crisis on another continent or a hint of turmoil in some corner of the globe can have affect trading. These effects can have far-reaching consequences. These are the things you need to remember while selecting a particular Forex trading plan.

The strategy you select depends on various factors. How much money do you have to invest in your Forex Trading account? If you have more money, you will be more likely to survive swings in the market and stay in for the long haul. How much of a gambler are you? Will you freak out and exit a trade because it looks like it is going against you? These are questions you might only be able to answer once you start trading. At the end of the day you need to choose a technique based on these factors, and stick with it. Let us discuss a couple of popular Forex trading strategies.

Scalping

Forex scalping is a very short-term Forex trading strategy. In this case, the trader attempts to make money by entering and exiting trades in a matter of seconds or a few minutes. The idea is to profit off very small price movements here. As you can imagine it is, for the want of a better word, dangerous. It is also impractical for most new traders. Each trade costs the trader some money. Entering multiple trades in short periods of time will impact your profits negatively. You also have to be right more of the time. Worse of all, you will have to spend large amounts of time staring at charts on a computer.

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It is quite tempting to go this way as a new forex trader because you don’t have to spend as much time on analysis. There is also instant gratification. You should resist the urge though. It is almost always bad for you Forex account. It might also be very bad for your nerves. Once you have some experience in Currency trading, you can attempt this style of trading. Basically, only experienced and well-financed traders can have success at this.

Long-term trend following

Long-term strategies require a decent amount of patience on your part. They also require discipline, as there are times when it might seem like the trade has gone against you. For this reason also, you need to have substantial amounts of money in your account, or you can easily be wiped out when one of those trades goes against you. You have to stick to the plan. If you can pull it off successfully, you are going to make a substantial amount of profit. In order to do this, you need to follow the big, long-term moves that you can see on Forex charts. These moves can last for days, weeks or even years.

In order to cash in on a long-term trend, you need to trade the breakouts that occur in these trends when new highs/lows are made, or when established support and resistance lines are reached. At this point, an evaluation has to be made as to whether the price will go past the line, or rebound lower. One can make a projection how far the price is likely to go in either case based on the next support or resistance line, or the size of the previous price move. Using this strategy has to be done within the context of the current economic environment.

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