Regardless whether you are new to forex trading or you are an experienced trader with a strong knowledge base and history of trading as your foundation, the forex trading strategy you choose can be pivotal in deciding the outcome of your trades. From the outset, it is imperative that you identify a number of trading strategies and figure out which suits your situation best at that given time. Applying the wrong trading strategy, or at the wrong time, and this could spell trouble. Alternatively, the correct strategy in tandem with other variables can be handsomely rewarding.
Factors to Consider When Choosing a Trading Strategy
Risk Management
One of the primary factors to consider when choosing between forex trading strategies is how much you are willing to risk in terms of capital. This will go a long way to determining a suitable trading strategy, or at the very least, eliminating some of the riskier, short-term plays. Generally speaking, the longer the trade position, the lower the overall risk.
Time Availability
Trading forex online demands a certain time commitment. This commitment can vary greatly depending on the amount of available time you have, and how much of it you wish to on the forex market trading. For those with a lot of time to monitor positions and the markets, certain short-term trading strategies such as day-trading and scalping may be effective.
Market Conditions
The overriding factor which can influence your trading strategy and the fundamental forex trading sector, is the market condition. It is key that you always keep a close eye on the market, a volatile market may be open for sentiment based, or swing trading in the short-term, whilst a calm market may be much more suited to long-term trading positions.
Ideal Trading Strategies for New Traders
Once you have considered the elements above, you can set about deciding upon your trading strategy. Typically, a top forex broker will also be positioned to provide extensive educational resources. These can help ensure that you make the most informed decisions possible when forex currency trading online.
Buy and Hold Trading
The by and hold based trading strategy is one of the most simple which a new trader can implement when forex trading currency online. When implemented with a stop-loss, this strategy ensures that the trader always has a specific exit point to manage losses effectively, and does not need to constantly monitor the market position. This strategy can also be easily adapted and automated to take profits with predetermined sell orders through almost any forex trading broker.
Trend Trading
Trend trading is a more active trading strategy than buy and hold. It involves determining the market direction or trend, and trading accordingly. Typically, the market direction can be best gauged using a combination of technical, and sentimental analysis. Tools for conducting basic forms of this analysis suitable for new traders are easily available through any major online currency trading platform.
In its most simple form, traders will try to enter a position when the market is in a clear uptrend, and exit when this trend begins to reverse. This strategy is suitable for new traders only when there is low market volatility.
Ideal Trading Strategies for Experienced Traders
Day Trading
For experienced traders, day trading is how they will commonly earn their living. This will typically involve frequent trading throughout the course of a day and for that reason it is important to choose the best regulated forex broker with the lowest commissions and best spreads.
Typically, day-trading by definition means that all trades are closed by the end of the day with no positions being left open overnight. Many professional traders will also automate much of this trading through custom algorithms available through major trading platforms.
Swing Trading
Swing trading involves the extensive use of technical analysis for traders to identify the point in a trend where the market will change direction, or swing. At the core level, reading and understanding of advanced candlestick patterns is vital to swing traders.
Swing traders are usually active over the course of a day, and make their returns throughout periods of volatility which occur before a trend changes course or a new direction takes hold. This can be a highly risky strategy even for experienced traders if the market does not move in one particular direction for an extended period.
Conclusion
Though it may seem daunting or intimidating to begin with, online forex trading can be exciting and potentially lucrative for all levels of trader, from beginner’s right through to professionals. As we have noted, there are several set trading strategies which are most suited to each group, and provided you engage with a broker who offers high quality forex trading for beginners and beyond, your forex trading journey is sure to be rewarding.
This article was produced by TradeFW. As one of the top brokers in the forex industry, TradeFW has developed an extensive educational curriculum comprised of everything you need to learn and grow your forex trading future, from beginner’s right through to professionals.