Forex trading is a deep and complex field, and something that takes a long time to learn. Some of the best traders in the field have been refining and tweaking their forex trading strategies for a decade or more, as they figure out ways to work around the volatility in the market.
These days, trading online means that people need to be able to respond quickly to world events and changes in the market conditions. The forex markets are open basically 24 hours a day, and it can be hard to cope with the sheer volume of trading that is going on with some of the most popular currency pairs.
Which Forex Trading Strategies To Use?
Indicator based forex trading strategies are locked to the kind of market conditions that they were originally designed for, while strategies that are based on price action are more fluid – they are simpler strategies, but they are also better able to adapt to the conditions that tend to crop up so often in the markets.
Keep it Simple
If you are a beginner trader, it’s a good idea to keep your forex trading strategies relatively simple. The more you complicate matters, the harder it will be for you to cope with what is going on in the markets, and the more likely you are to make mistakes – even simple strategies, if they have sensible support and resistance points set, can be very effective for helping people to get started with trading.
It’s important that whatever strategy you choose, you stick to it. Don’t make the mistake of getting overly invested in a particular currency or movement. If you decided to sell at a certain point, sell then – and then re-evaluate the market conditions. Holding on to a bad trade when you had planned a stop loss MIGHT put you in a position where the currency bounces back – but it’s just as likely to net you a margin call. Clinging to good currency in the hopes of it getting even better could increase your profits, but it could also leave you stuck with currency that starts to trend down again.
There is no room for emotion in forex. The best forex trading strategies are ones that crunch numbers or focus on the kind of hard facts and fundamentals that are so influential in the markets. Anything else is a massive risk, and something that you cannot afford to mess around with.
Don’t clutter your charts with a mess of indicators – especially if you don’t understand them all fully. Pick the most important indicators and focus on those.
Don’t trade too many currency pairs, either. Stick to the pairs you understand well if you’re looking at fundamentals, or the ones that are showing you the clearest lines. Pairs that are frequently traded tend to be the easiest to work with – the less popular pairs see lower volumes, and can often be more volatile – volatility and low volume combined makes for very high risk.