How to choose a Forex trading strategy

Since the introduction of the Internet, information has become more accessible to the free world and with access to all this information that otherwise be unseen, there have been ways to utilize this information in order to make a profit. As time went out, technology had improved dramatically and allowed for more advanced platforms for people to use, and one of these platforms is a trading platform.

Before the technology boom, trading was only available to the select group of elites that had a good education and good connections to be able to enter into this world of finance.

However that has all changed now with people from all over the world having access to a plethora of different trading platforms and technology to help them succeed in this industry. Furthermore, trading is still a career path for only a select group of people that have the discipline and intellect to be able to take advantage of these financial markets.

The question on a lot of people’s minds when they first encounter forex trading is “how do I get started?” or “how do I choose an effective strategy?” Selecting an effective strategy is one of the most important aspects of a trader’s career, and it requires a lot of time, focus and research to be able to be to iron out the details and get rid of redundant aspects of your strategy. In order to choose a forex trading strategy, you first need to discover what type of trader you are.

Discovering what type of trader you are can make all the difference when trying to trade on the financial markets, because they can just as easily make you profitable, but just as easily turn against you and take away all your profit. Not all strategies work in the same way, with some only working on higher time frames and some only working with certain types of analysis. Part of working out what trader you are comes with figuring out whether you are a scalp, swing or position trader.

Scalp Traders - Scalp trading is the process of taking advantage of really small but quick movements in the markets. Scalp traders aren’t in trades for very long, in fact they might only be in a position from a few seconds to a few minutes.

Swing Traders - Swing traders will stay in the markets for a lot longer than scalp traders, as they try to utilize as much movement from the markets as possible, but will only stay in for a few days to a few weeks at a time.

Position Traders - Position traders are often mistaken for investors because of the amount of time they are in a trade for. Position traders will quite often be in a trade for months or years at a time. Once you have decided what type of trader you are, the next aspect to think about is how you are going to conduct your analysis as part of your strategy.

Most retail traders are fans of technical analysis, which is the process of studying price patterns and disregards any form of fundamental analysis. A trader who uses technical analysis as part of their strategy tends to believe that price patterns will repeat themselves in the future, and will look to spot those patterns again in an attempt to reap as much reward as possible. Popular tools of technical analysis include things like moving averages, oscillators and trend lines, all of which can used to develop a successful strategy.

On the other hand there are those that swear by fundamental analysis, which is process of analyzing economic data that comes out from a countries central bank. Traders will listen out for a series of data points such as interest rates, labour statistics and inflation figures in order to work out whether the strength of a currency is likely to continue, or fall based on these readings. The important thing to remember with forex trading is that there is always some analysis to be done and is a lot of hard work and isn’t for the faint hearts.

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Wednesday, 23 January 2019

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