Strategies for Forex Trading

What do you do with your money? Do you keep it in a bank? Do you hold onto your cash? Do you spend every penny you earn? If you are smart, you invest your money. There are plenty of investment opportunities out there. Forex trading is one such opportunity, and while it does take some time to perfect your system, there are several strategies for that will enhance your opportunity to make money off of your investment. In fact, if you want to succeed in this business, the right strategy is an absolute must. Without it, you’re certain to make some very real mistakes. Ready to get started? Read on to learn some important strategies for successful Forex Trading.

Strategy One – Currency Analyzation

Understanding how to analyze currency, then taking the time to predict movements within the market as well as fluctuations in currency is one good option. You can use one of two methods to analyze the currency.

• Technical Analysis: Here, you look at the price of currency pairs to see the trading signals. Technical analysis is its own science, and it’s filled with terms like Bollinger Bands, Relative Strength Index, Stochastic Oscillators, and Fibonacci Retracements. Fortunately, these signals aren’t as intimidating as their names, and they’re not that tough to use with a bit of study.
• Fundamental Analysis: In this strategy, you look at outside factors, like governmental and policy changes, to see what might play a role in the value of the currency. For example, if high unemployment numbers are suddenly released or something goes awry politically, you may change your strategy based on that.

Strategy Two – Day Trading

This strategy is actually one of the most common strategies, thus it is one anyone including beginners can use well. When using day trading as a strategy, you’re not taking night trading positions. Rather, you purchase during the daylight hours only, and all positions are then liquidated by the end of that same trading day. The longer a position is held, the higher risk there is of losing on that trade. If day trading is the strategy used, many small trades can be made, thus higher risks can be avoided. Small changes in currency values occur each day and taking advantage of these changes can prove to be profitable.

Strategy Three – Support and Resistance

Also called range trading, this is another strategy that can be extremely useful when involved in Forex trading. It is commonly used, and it’s a fairly easy choice for beginners and experts alike. It works like this – every currency has fluctuations throughout out the day and the week. The fluctuations throughout the day and week, if watched and monitored, can help identify future trends in currency movement. To do that, you need to learn more about the past price movements of the different currencies to learn what the support and resistance levels of those currencies are or what the typical range of currency trading activity is for those specific currencies.

For example, if a currency moves, in general, between $1.03 and $1.15 during the course of a day, then the support price is going to be $1.03. As a trader, you want in at the support price. Then, when the price goes up to $1.15, that is the resistance price, you opt out and cash in. This strategy is fairly easy, as it mostly involves research.

The Bottom Line

Following the strategies is vital to your trading. When strategies are not followed, you are more susceptible to make emotional and on the whim types of decisions, which could result in more loss than gain. Find the right strategy that meets your needs, then start trading!