When taking your first steps into the world of Forex trading a handful of things to ensure you do are key. These include sticking to a budget, never jeopardise your financial existence on an FX trade! Be sure to risk manage or hedge every trade your make and only ever start trading when you have role played and demoed a pre-planned Forex Strategy.
A forex strategy is a method or program to trade which is typically committed to when the trader receives certain forex signals which support an FX traderâ€™s rationale and trading plans.
Identifying the Best Forex Strategy For You
As FX trading platforms evolve as do their solutions, many very successful traders now have the ability to accumulate thousands in profit from the comfort of their homes on an FX app. Others follow the markets tirelessly with multiple screens managing lots of short trades at any one time. The best Forex strategy for you will certain be defined by your personality, the amount of time you wish to commit to trading and importantly whether this is a hobby or a full-time vocation.
Most Popular and Common Forex Strategies
Short quick trades whereby the trader goes long or shorts a certain currency pair to gain a handful of points before moving these. These can work brilliantly when fundamental data is released of heads of banks speak as they typically provide volatility, this naturally comes with its own risk as sometimes they surprise you. A great example of this is when the Swiss unpegged their currency.
Simply explained a day trade that is always closed by the day, the main benefit to eliminate rates of the trade being affected by overnight swings in other markets.
A swing trade comprises of a position or positions which are held for several days and in some cases up to two weeks. A swing trader will attempt to guess a trend or a certain currency pair strengthening or weakening. Implementation or stop losses if important to manage risk. This type of trade should be endorsed with good fundamental data rather than gut feeling.
Position trading is used when an FX trader follows long-term trends. Their main objective to profit from large FX pair movements.
Forex Signals Explained
Put simply a Forex signal is when a currency pair, for example EUR/USD, is promoted as aÂ tip to trade on. Typically, the signal will include a Bid or offer price and will include a set trading time frame.
These Forex Signals are typically generated via Forex algorithms, Forex analysts and are normally distributed via email, subscribed newsletters or Websites that have a good understanding of Forex strategies.
Support and Resistance
Traders will often speak of Supports and resistance when discussing or sharing forex strategies. Support describes the way a certain currency will recover or strengthen following lows. Â FX market resistance is when a currency or currency pair reaches a high and cannot progress any further. Typically then a trader who has been long on a certain position will then sell and attempt to profit from the currency pair weakening.
Finding the Best FX Platform
With literally hundreds of FX trading and spread betting platforms available it can be sometimes hard to chose the best way forward and select the platform that best suits your needs. Before signing up it’s useful to ensure you can comfortably answer the following questions-
- What leverage will you want to be trading at?
- How will you be looking to credit or top up your platform?
- Will you be trading major currencies or looking towards more unpredictable yet potentially more profitable exotic pairs?
- Can you afford the minimum deposit?
- Have you checked to see if the platform is regulated in your country?
- If you are trading from a mobile phone or device is the platform compatible?
Finally, once all of these points are covered, please read platform reviews with an open mind to ensure you are aware of the benefits but also the drawbacks. If new to FX trading many offer a demo account. These will give you a risk-free insight into FX trading and are well worth spending some time on.