Forex trading can be as complicated or as simple as your trading strategies. The biggest global financial market attracts new traders all the time due to its investment potential. It is also a daunting task that can emotionally and physically drain you if you do not lay down a proper trading strategy. Becoming a successful forex trader will require a well-established trading strategy. Even if you choose to use the services of a broker, ensure their strategies match your needs.
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What Is a Trading Strategy?
It is a well laid down plan to help a trader attain trading goals by employing methods that drive your trade towards profits. The best way to start formulating your strategies is by first learning forex.
Equip yourself with enough knowledge on how financial markets work. Learn how to control your emotions and avoid impulsive trading. It would also not hurt to find yourself a mentor to hold your hand through the process. Start simple and grow into the complexities of trading progressively.
How to Choose a Strategy
A basic understanding of how the money market works and what brings the changes is a vital characteristic of a forex trader. To choose a strategy that will work for you, consider the time you have for trading, your choice of currency pairs, the investment at stake, and the trade duration, whether long term or short term. Below are quantitative trading strategies you might consider utilizing.
Day trading Strategy
Day trading involves making trades during the daytime and closing them during the night. It makes a trader safe from overnight market changes. It requires a lot of time to monitor and understand how any economic news involving the pair being traded can affect your trading direction. It required a lot of research and discipline; otherwise, it may lead to failed investment. You can read this article by forbes.com.
Swing Trading Strategy
As the name suggests, swing trading involves trading when there is suspicion of fluctuation of one currency’s value over another. It is a good strategy, but it requires good analytical skills to understand and predict the money market changes. News and political events are huge determining factors of how to swing. Currency pairs with lower liquidity work better for the swing strategy.
News Trading Strategy
The strategy is based on the anticipation of changes in the money market from the news. A trader should be able to quickly analyze the news and decide how to make a trade. A notable aspect to consider when using this strategy is how the news matches the market expectations and prices. It requires quick and sound judgment.
End of day Trading Strategy
A trader chooses to trade just before the markets close while relying on the previous day’s movements. Here, the trader moves when they are sure that the price will close as it is. The strategy requires the right analytical eye for studying the opening and closing charts to know how the price is likely to close or settle.
Are you Ready to Start Trading?
Whether you are looking to trade forex or stocks, choosing a trading strategy depends on your personal needs and what you aim to achieve with the trade. Always keep track of your profits and losses. It will help you know if a particular strategy is working or not and when it is time to move to a different one or even combine a few. This article by cnbc.com shows that Forex trading can bring great rewards.