Forex trading strategy types
By the time you are thinking about a forex trading strategy, you should have spent a fair amount of time trading through a demo account. A demo account gives you the knowledge and experience you need to become a better trader in the future. A demo account doesn’t require you to deposit your hard-earned money into it, which means that you will be risking nothing at all. It also means that you may not necessarily need to spend a lot of time and effort deciding which online broker to go with.
However, things change when it comes to opening a live account because that involves putting real money on the line. To be safe, you will need to spend some time choosing an online forex broker to work with. You are required to carry out some research to find a good broker that has a good reputation in the industry. The market is filled with many brokers who have less than reputable track records and that is why you need to be careful with your choice.
Once you find a good online forex trader, you should open an account and start thinking about a trading strategy. In this article, I intend to look at a few forex trading strategies that you can make use of to make money and gain more experience.
Scalping is a very active strategy that is used only by the best traders who have a ton of experience in forex trading. This strategy is based on the ability of the trader to make profits from short-term changes in currency values. For instance, currency values vary slightly continuously throughout the day. Thus, as a scalper, one places a trade and observes as currency values change with a few pips and then exit their positions to make a profit gained due to the change in currency value.
Scalping requires one to actively observe the market and their positions. The main advantage with this strategy is that it doesn’t require one to engage in any major research because all positions are meant for the short term while the traders is glued to their screen. Many scalpers close their positions when they move away from their computers or retire to bed for the night or even take a nap.
The main disadvantage with this strategy is that it is very possible to lose a lot of money due to being uninformed.
Like the name suggests, day traders carry out all their forex trading activities during the day and then close them when the day ends. Holding positions overnight introduces a level of risk that day traders are simply not willing to take.
Trend trading is a long-term trading strategy that involves traders trying to estimate intrinsic value with the aim of establishing directional movements referred to as trends. Trend traders profit from trends by placing positions and holding them until the trend they think is happening ends.
Most traders usually use more than one strategy in their trading in order to make maximum profit, especially when dealing with forex brokers with zar accounts.