It is crucial for people entering the forex market to use decent forex strategies. Several thousand people get started in forex trading every year. When they begin their business of trading in the forex market, there is all the likelihood that they will commit critical errors for one simple reason and that of not adopting good forex strategies, to begin with.
FIVE SIMPLE FOREX STRATEGIES TO PLAN AS A BEGINNER
• The initial step towards forex strategies is to choose a good forex broker who is regulated by the National Futures Association and registered with the Commodity Futures Trading Commission.
• The second simple step in the adoption of forex strategies is to start through a demonstration account with a good forex broker. Once you go through the demo, you will need to know how much money you are willing to deposit while opening a trading account and how much money you are willing to risk with your total equity. As a forex trader, you should not adopt those forex strategies that are complicated. You have to select a simple and easy strategy. You have to learn the basics and not rush through the process. Decide on the timeframes you want to trade as an important part of your forex strategies.
• The third simple step in forex strategies is to get access to the updated forex tools to help you get started. Various brokers have access to important tools. Select a forex broker that has the best and most up to date forex tools at his or her fingertips. You have to learn the ins and outs of the forex currency trading to make intelligent trading decisions with your forex strategies.
• The fourth simple step in forex strategies is to learn about you. What kind of trader do you want to become? Are you a risk-tolerant person? Can you accept mentally when you lose money? Are you disciplined enough? Do you have patience? Even while losing, would you be able to follow a strategy? Develop a strategy that fits in with your mental profile. Then you are ready with your forex strategies to get started with trading in the forex market.
• The simple fifth step involves the learning of the technical and the fundamental analysis in forex strategies. You have to build a good foundation with a reasonable understanding of interest rates, international trade and world economy to get a feel of the price trends in the currency market as part of your forex strategies.
FUNDAMENTAL AND TECHNICAL ANALYSIS AS PART OF FOREX STRATEGIES
You need to pay close attention to fundamental concepts and technical analysis when you are trying to adopt good trading forex strategies.
• Fundamental Analysis
This kind of analysis helps you to gain a better understanding of long term currency price trends in the forex strategies. Many factors affect the value of a country’s currency. The important factors that are taken into measure in the fundamental analysis are the total economic, social, and political conditions of a particular country. It is important for you to be tuned to the influence of many such factors like news from the central banks, non-farm payroll reports, political events, consumer price index, payroll imports, and exports. Trading on economic news releases is one of the most important fundamental forex strategies.
• Technical Analysis
Technical analysis is used through charts and graphs that follow past data analysis on both price and volumes of currencies. A common way that is adopted through grid trading forex strategies.
TRADING ON ECONOMIC NEWS RELEASES AS FOREX STRATEGIES
One of the fascinating forex strategies that can be employed when trading is to use economic news releases intelligently. You can use economic news releases to get in and get out of the currency positions. You will find out sooner or later that you can utilize the news releases as part of your forex strategies to make your money. This is mainly because of the international nature of the forex trading market, and also due to the impact, the basic economic factors have on the currency trading market.
If you watch the economic news items closely as part of your forex strategies, for example, the U.S.` Non-Farm Payrolls’ and the GDP numbers, you will observe that they tend to influence noteworthy reactions in the forex trading market, particularly if they are likely to vary considerably from the market’s standard expectations.
You can try and position yourself on both sides of the market before an important economic news release using a hedged position in these forex strategies. You can wait for the release and then begin to trade out your position. For instance, you may take a loss on one side post-release after having taken a larger profit on the winning side of the trade. This is one of the hedging or straddling forex strategies that can involve going both long and short in the same currency pairs before the release of a significant economic news item. Action is not taken until after the news item is released. Once the news gets released, you have to decide how to manage the trade out of this dual stance. Usually, this will involve taking both a profit and a loss. The difference between profit and loss is what matters in these forex strategies. If the news release is positive and favorable, then you can take profits on the trade first. This will allow you to decrease the loss on the unprofitable leg as the market corrects itself after it generally makes an exaggerated reaction to the economic news item.
If the economic news item is unfavorable, the same basic follow up forex strategies have to be used when the market falls by closing the winning short position first and then trading out of the losing long side of the hedged position. A variation in this forex strategies technique will involve instructing a stop-loss immediately on the losing position and waiting for it to be hit. Once the stop-loss is hit, the winning side of the position can be held on to for extra profits, or you may decide to liquidate them immediately.
The forex market reacts every day to the release of fresh economic news. The important economic information releases that are most often traded upon as good forex strategies are:
• U.S. Non-Farm Payrolls – It is an influential economic indicator that is released every month by the United States Department of Labor as a comprehensive report on the status of the labor market.
• Interest Rates that are set by central banks have a direct influence on currency pricing. Central bank intervention can induce forex market volatility.
• Gross Domestic Product
• Employment Numbers
• Inflation Numbers
• Trade Balance
GRID TRADING FOREX STRATEGIES
Grid trading is one of those types of forex strategies that will try to take advantage of the natural movement of the currency market forth and back by placing orders both above and below the current market price and then trying to catch the profits as the market moves.
The best part of such forex strategies is that this type of trading model does not require any predictions on the direction of the currency market. However, the advantage of eliminating the variable of price prediction comes with a cost attached of intricate money management, grid visualization, and trading psychology issues that you will need to tackle with when trading grid forex strategies.
If we look at the elementary grid using the Euro/U.S. Dollar pair, let us assume that the pair is trading at 1.5000 and we decide to use ten pip intervals. One of the basic forex strategies of the grid will be to set up buying orders above this price and selling orders below this price at preset intervals, each with a uniform profit target and no stop-loss orders. Usually, two trading accounts are required to manage the grid forex strategies a bit easier.
On one side, you will have to buy stop orders at 1.5010, 1.5020, 1.5030….; on the other side, you will have to sell stop orders at 1.4990, 1.4980, 1.4970. Each order will have a take profit attached to it. You can now place your grid in motion. In these forex strategies, you can look at the easiest of all possibilities where the price moves straight up or down. If the price moves up, the buy orders will be opened and closed out in profit as the price continues up to the take profit level. If the price moves down, sell orders will be opened and closed out in profit. New orders replace positions that are closed out. There will be `buys’ every ten pips above the market price and `sells’ every ten pips below. The most important aspect of such forex strategies is your ability, both psychologically and financially, to deal with carrying losing positions for some time.
Once you start using forex strategies and discover a particular system working for you, spending time and perfecting it to finer details is advisable. Some people use many different kinds of technical analysis when executing their trades, while others try to focus on one specific analysis that is working best for their forex strategies. Some brokers advise the utilization of a mix that is consisting of both fundamental and technical analysis to identify good entry and exit points and to make long term projections as part of your smart forex strategies.