Investing is an exciting opportunity that can provide short-term gains and long-term financial security when done properly. There are variety of Currency ( Forex) Trading strategies available. Following outlines the most common strategies.
Currency Analysis
One of the easiest Forex trading strategies is known as currency analysis. This is a very effective method of predicting market movements and currency fluctuations. There are two different methods used to analyze currency: Technical analysis and Fundamental analysis.
Day Trading
This is one of the most popular Forex trading strategies and it is employed by both beginners and experienced investors. A day trader, will not hold any trading positions overnight. He may make multiple trades within a single day but he needs to liquidate all of his trading positions before the market closes.
But the longer one holds a trading position, the higher his risk of losing on the trade. By studying the currency fluctuations on a daily basis, it becomes apparent that practically every currency fluctuates throughout the day. Although these price fluctuations may be small, many trades over the course of a single trading day can result in significant profits.
Many experts recommend that day traders use significantly more investment capital than some of the other strategies mentioned because the fluctuations are magnified with larger amounts of money. Since Forex relies on leverage, it is relatively easy to make large trades without having a lot of capital on hand. The drawback in this system is that one can easily lose money that one cannot afford to repay if leverage works against you during a particular trading day.
Range Trading
Sometimes also known as support and resistance levels. This system relies on the fact that each currency has price fluctuations throughout the day and the week that remain relatively constant.
Many commonly trading currencies have relatively predictable price movements and by studying the charts for a few days, identifying the trading signals is straightforward. For instance, if a currency generally fluctuates between $1.4 and $1.7 throughout the day, these would represent your trading signals. The support price is $1.4 – this is when you want to purchase this particular currency. The resistance price is $1.7. As the currency value approaches this number, one would want to trade out of the position and extract profits.
As you can see, the key to this method is studying the average fluctuations of your target currency well enough to identify the support and resistance prices. Although the profits generated using this range trading strategy are typically not as significant as traditional day trading or currency analysis, the consistent profits you can reap using this method make it one of the better options to consider as a novice Forex investor.
Some other yet very popular Currency Trading Techniques are : Hedging and Speculating
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