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The Different Forex Trading Strategies and Methods

Forex Trading Strategies and Analysis

There are a number of different forex trading strategies and methods that you can use on the market.  It is important that you know about some of these methods and what they have to offer.  Once you know about the forex trading strategies you can find one that works well for you and your trading style.  You should also consider how simple the strategy is because you do not want to trade with a complex strategy.

Carry Trading Forex Trading Strategies

This strategy requires that you borrow currencies with low interest rates, sell that currency, and invest in one that has a higher interest rate.  This is attainable when the currency that has a low yield is on the sell side and the one with the high yield on the buying side.  The risk that you face in this instance is when the short side has the potential to increase in value as this makes it more expensive for you to repurchase the currency that you initially borrowed.  All forex trading strategies have the potential for you to lose as well as make money.

The Use of Fundamental Analysis

This strategy uses global fundamental influences that affect currency pairs.  Economic news from the different countries is the factor that affects most currency pairs.  The effect of the news depends on pair matching and if the currency that is most affected by the news is the base or the counter.  Currencies are traded in pairs in the foreign exchange currency trading world.  The movements of the rates are relative to these currency pairs.  It is not always blatant as to which currency is the stronger or the weaker in the pair.

The Use of Technical Analysis

Technical analysis is a suitable strategy because of the volatility and liquidity of the forex markets.  This strategic method is suitable for use with any currency pair provided you are aware of possible economic events that may cause huge movements in the market.  When this happens, you may choose to let these market influences pass before you continue with your trades.

Some of the Common Indicators

Many traders in forex use the same technical indicators as those who trade in securities and commodities.  There are a range of analysis tools that will allow you to view these indicators, such as Bollinger bands, Japanese candlesticks and moving averages, amongst others.

The Use of Trends

This market is well-known for indicating a wide range of trade daily, particularly for the major currencies.  These ranges have made the trading strategies that use the system of taking advantage of a particular number of pip movements very popular.  Traders in this situation will normally try to increase their profits by trading additional lots on a daily basis.

The Technical Indicators

Unlike fundamental foreign currency exchange traders, those who trade with technical look at trends to identify the most suitable trading opportunities.  Fundamental forex traders observe economic events and current news releases to identify opportunities.  Day traders often use technical indicators to determine and use a trend.  In cases where a long-term trend is identified, it makes it possible for traders to use technical analysis tools to check the condition that are related to that particular trend.

 

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