Over time, it has been discovered that lots of traders turn and return to Foreign Exchange (Forex) Trading as a way of securing additional income. While trading, they also try to manage risks in order to minimize and avoid significant losses which could defeat the initial purpose of trading.
Traders trade in Forex because it is an easy way to start investing and it requires minimal capital to start with.
Forex is a leveraged financial instrument and brokers offer traders with varying levels of leverage (depending on their country of residence and therefore the regulating entity through which the broker is regulated and authorized). ‘Leverage’ is a concept that enables traders to multiply exposure to a financial market without committing extra investment capital.
Traders can use leverage on their own capital to open larger positions despite the initial deposit, providing them with the chance of greater gains.
In return for providing leverage, brokers ask a spread, which is the difference between the bid and asking price along with the buy or sell rate. Forex brokers are compensated for their services through an instrument called ‘spread’. Different brokers provide different levels of leverage along with different spreads.
As opposed to other financial instruments, traders choose Forex because there are no commissions or fixed lot sizes and the transaction costs are especially low due to the market liquidity along with the fact that it is a 24 hour a day, five days a week market. Forex is commonly traded in specific amounts called lots, or basically the number of currency units you will buy or sell.
Key Forex Trading Secrets and Strategies.
Choosing the right broker and trading platform are only two of the things needed to trade Forex successfully. There are a lot more to discover and understand while one journey to becoming a successful forex trader. Below are some tips:
Access to information
Despite different time zones, due to instant communication and the internet speeds and capabilities, traders need to realize that any event in any part of the world at a given moment may affect their market. Therefore, traders need to ensure that they stay updated on world news from credible sources.
Using Economic Calendars
This tool is often overlooked by traders who only track the occurrence of market-moving events. By using an economic calendar, traders can anticipate and therefore organise a plan around a future occasion that may impact the Forex market and their trading strategy.
Comprehensive and extensive analysis
Traders need to conduct analysis by using powerful charts and a variety of tools and the access to this depends on both the broker and the trading platform used by the trader.
The more customization and technical indicators along with analytical objects the trader has access to, the more they are able to conduct enhanced analysis.
Traders need to ensure they have advanced charting skills, a variety of indicators and tools along with access to reliable news sources and data that will allow them to do either technical or fundamental analysis and in a lot of cases, both.
Constant Practice
Perfecting a trading strategy comes down to trial and error through extensive and thorough testing in live situations without risking actual capital. By making use of demo accounts, traders can test their strategies in a safe environment without risking any losses. A lot of brokers and trading platforms make provision for standalone strategy testers that can be used by traders who want to test their strategies.
Record Keeping
By keeping a trading journal or diary, traders are able to keep up to date with their trading activity and their trading strategies in addition to being able to identify trends in their activity.
A trading journal or diary can also be used to make note of mistakes made in an effort to avoid making the same mistakes as well as keeping records of successes and how they were achieved.
The best 2020 Forex Trading Strategies.
Grid Trading
This trading strategy has been in circulation for quite some time and although it is reliable, it may be quite complex without software. The software used in running this strategy works by assigning quadrants to a certain section of the trader’s charts. Every quadrant is then supplied with a probability value which is based on the number of times the price has been presented within the quadrant. By using this, the trader will be able to see where the price has been along with where it is likely to go.
Fibonacci Strategies
The Fibonacci system is used with the purpose of pinpointing new price movements whether they are coming or going. On a daily basis, a centre line is drawn on the charge with fib levels that go outwards in both an in and out, or up and down, direction.
An added benefit of the fib levels is that they can easily act as ‘stop-loss’ and ‘take profit’ levels, and it is a fully automated process.
Trend Strategies
These strategies aim to make a profit by examining the instrument’s momentum as it moves in a particular direction. Should the predominant price move show a certain direction regardless of whether it is up or down, it is known as a trend.
While a lot of traders use this, it requires some study in determining not only when a trend has started, but also in predicting whether the trend will continue in a certain direction and when it is the best time to enter a trade, and when it is time to exit.
Breakout Strategies
Breakout strategies are about volume. Most traders often choose to execute larger trades instead of relying on numerous smaller ones. However, breakout strategies use price boundaries to identify larger surges of movement when they occur.
The application of the breakout strategies happens when traders attempt to enter the market should the price move outside a defined price range – whether it is support or resistance.
There are numerous trading strategies that can be used by traders and there is no one holy grail of strategy that works for all traders every time. Traders need to research different strategies and their rules, use and parameters along with their applied use. This would enable them to identify a strategy that works for them while having a variety of strategies to readjust to as market conditions change. This is important because market conditions change constantly based on several factors, of which economic situation is a major factor.
