Forex is among the biggest markets of the world when talking about trading. It features over 2 trillion dollars that are traded every day. Most people believe that just professionals can trade forex but the truth is that thanks to technology advancements we now see many novice traders that can operate in a volatile forex market. The problem is that forex is a field that is based on speculations so investors have to understand the basics before they can bring in profits or learn advanced techniques.
Forex market currencies will always be traded in pairs. The first currency that is used is known as the base currency while the second one is the quote or counter. Every quote that we notice in forex will be issued with the use of a base currency. Currency quotes have to components: bidding price and asking price.
Basic Strategies in Forex Trading
Forex transactions are vulnerable when faced with different social, political and economic events. This basically means that there is a lot of risk when trading in forex. We have no strategies that will completely minimize risks but the techniques below will help in maximizing profits.
Basic forex strategies :
Trend trading : This strategy follow daily or weekly or monthly bullish or bearish trend.Trend trading traders always follow current daily trend and current strong momentum.
Breakout trading : Breakout traders wait that price breaks strong support to sell or wait that price breaks strong resistance to buy forex pair. They monitor daily trend.
Swing trading – Swing traders like H4 chart time frame. Swing traders trade against daily trend and they wait for strong resistance to sell or wait for strong support to buy currency pair. Most of them are trend trading traders and they follow weekly trend against daily correction.
Scalping – Day traders will usually use scalping. Thanks to scalping we can trade in small time frames and make small profits. As time passes the profits add up. We have to understand that the longer a trade lasts the bigger the risk is. This basically means that when we go for short term trades we are basically in front of lower risks.
Hedging – This will basically take both trade sides at the same time through a long term and a short term position. The same pair is used and experienced traders will actually use 2 pairs in order to create a hedge. The problem is that this strategy is quite complicated when tracking for novice traders.
Now I will suggest you 3 basic forex strategies:
Fore traders also need to create stop orders on most investments. They will basically mean that when the price noticed has fallen to what the trader chose the currencies are going to be sold. This is done in order to minimize losses when the market takes a downturn that was not expected.