It is best to have a strategy when trading currencies. To simply jump in is foolish. So as a guide, here are a few that are time tested and known to be profitable. Much like trading stocks, the idea with all strategies here is to buy low and sell high.
The first thing you need to do is find a technical analysis tool that you are comfortable and know how to interpret well. There are many available across the Internet and they are all dependent on market indicators. No matter which tool you use, they all contain the same information.
The Martingale Strategy
This is a high risk one and is not for the faint hearted. The strategy is to purchase a double lot after each losing trade. Sounds counterproductive but actually is not. Setup is to take several different indicators and let them auto select the open/close positions. This gives you a high probability of winning trades. When you double a lot after a losing trade, you can then position yourself for a profit on that specific currency pairing. Be warned that this strategy could lose you a significant portion of your account.
The Trending Strategy
This is exactly what it sounds like. Take your indicators and follow the trends in real time. The currency pairing will show a pattern that you can follow right to the bank. Most indicators and forecast tools will show you the movement over a selected period of time, i.e…a month, a week, a day, an hour or even as it happens live. Select your currency pairing, study the PIPs and make your purchase. Now watch your pairings indications and sell accordingly. Basically, you should buy at or on the downtrend, then sell at the apex of the uptrend.
The Reversal Strategy
This is where a buyer will identify the reversal of a specific trend, then open orders with that trend. You can use technical analysis or analyze the patterns of that currency pairing to find and confirm the point of reversal. Once identified and confirmed, your position can be transacted profitably.
Time of Day Strategy
A lot of Forex traders actually only trade or become active at certain times of the day. Since this activity affects the pairings activity and swings the analysis tools, you can form a nice strategy this way. After you have identified a time of day that is active for a currency pair, it is possible to set up buy/sell positions with associated stop losses built in.
One example of a good time of day strategic system is called scalping. This one has a positive win percentage of above 90%. The aggregate profits taken are normally much more than the losses taken. That being said, please realize that Forex trading is a profit and loss type of investment business. You must take losses alongside profits. Never use money that you would need to survive on. In other words, dont wager your house on a trade!
These are only a few of the many strategies available. The best thing for the individual Forex trader to do is find a strategy they are comfortable with. Because the Forex business has a certain amount of risk associated with it, it is advised that a strategy is put together before any positions are opened up.
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