Trading in the Forex requires knowing the particular operation of this market, and also knowing the speculation strategies specially adapted to this operation. Several different types of methods are distinguished based on your needs and capabilities, and also based on market conditions.
We will first be interested in the most common strategies, that is, those that are based solely on technical analysis. These turn out to be effective when it comes to investing in short periods or when operating from a tool.
Indeed, technical analysis provides very valuable information on the way in which the price of a share is likely to evolve in the short, medium or long term. But, above all, it makes it possible to detect some indicators that are generally the starting point of an acceleration or a change in trend. So taking positions on these indicators is currently an effective strategy. In general, these indicators are the pivot points and the levels of technical support and resistance.
It is also interesting to establish a strategy for trends limiting risks. These strategies simply require taking positions for an ongoing trend whose volatility is strong enough.
The Day Trading:
Day Trading is a popular investment method for Forex traders, but it requires some knowledge and understanding of the market.
Its principle is to carry out a large number of small trades in one and the same day and close all positions before the end of the session. Therefore, this investment method is profitable when you accumulate a large amount of small profits.
To achieve your day trading strategy, you will need to use leverage, which also increases risk. Therefore, knowing how to stop your losses at the right time is essential so that your total winnings exceed your losses. The level of risk is rather important and you must demonstrate prudence and above all reactivity.
The ideal would be to recover your profits to less than 2 or 3% of maximum profit and especially stop your losses before reaching 10%.
The Carry trade:
The Carry Trade method is reserved for a more knowledgeable audience, as it is a bit more complex. This time it consists of using the difference in the interest rates of the currencies to carry out a profitable operation without taking into account the evolution of the market.
In practice, this is actually buying a currency with a low interest rate and reselling it against a currency with a higher interest rate.
Before launching into this speculation strategy, you must identify the currencies that present high and low interest rates, but you must also take into account the amount of spread practiced by your stockbroker so that this agent does not keep your profits .
On the other hand, Carry Trade requires consistent investment.
The swing trading strategy is also an interesting investment method for traders with a less complex analysis method than for other strategies. Its principle is very simple and consists of speculating only on trends.
To do this, it is first of all necessary to identify the most marked and safest trends in the market. You should then position yourself in the direction of this trend as soon as possible and close your positions when it begins to weaken.
To perform a swing trading, it is interesting to monitor the supports and resistances in the price of assets.
The Forex Scalping:
The Forex Scalping strategy is similar from every point of view to that of Day Trading, with the difference that here it is not mandatory to close all your positions at the end of the day.
But the general principle remains the same since it comes down to taking very short trades in the direction of the trend and recovering very small but large profits. In this case too, the amount of your investment must be sufficient to guarantee your earnings and you must use significant leverage and therefore act prudently in time, interrupting your earnings on time.
Strategies based on fundamental analysis
Another winning investment method when trading stocks is to use fundamental analysis data to take positions only on important market events.
This strategy requires consulting a stock market agenda every day in which we can see in advance the events that can be followed. It can be about introductions on the stock market, new fundraising or even the presentation of a new project or a change in the commercial strategy of a company. The moments right after these announcements are, in general, the most volatile, leading to the largest changes in stock prices.