Last Updated on by
While Forex or currency trading has attracted global attention among investors who are interested in it, the use of an appropriate trading strategy has remained to be insurmountable for many traders for a long period. Whereas currency trading has been deemed to be a practice that involves elites in the society, choosing the right strategies is fundamental for continual success in the business. Failure to be cognizant of the right approach to apply when trading various currencies has deleterious effects on the future performance of the investors as this can led to a total loss of money by a foreign-exchange trader.
Axiomatically, to be successful, it is essential to identify and choose the best strategy that will decrease loses while maximizing profits. Therefore, it is the traders’ onus to warrant that they apply the best approach for different currencies being traded at a specific time. Necessarily, as far as currency trading is concerned, there are numerous trading strategies that investors or traders in this field can apply. foreign-exchange traders are expected to display high sense of desirousness . The best currency trading strategies are epitomized with medium positioning size, risk management and options on how to exit a trade when chances of making loose are inescapable. Buziness Stretch seeks to discuss some of the currency trading strategies.
Day currency trading strategy
This a currency trading strategy that is executed before and immediately the day ends. Investors unusually engage in currency trading instantaneously when the stock market opens and ends it before the day ends. Under this strategy, traders are likely to circumnavigate the overnight eventualities that can reduce their profits. The strategy is best for beginners who wish to engage in currency trading. Trades made are active only for a few hours or minutes. The price bars which are found on the trading charts can be set based on the time selected by the traders such as one or two minutes.
Some of the benefits obtained while using the strategy is its usefulness for beginners because it is easy to understand. Secondly, since trades are made during the day, the chances of heavy losses overnight are reduced. Thirdly, it is easy to trade within a short period and make significant profits within the shortest time possible. Nevertheless, the approach suffers grossly from common flaws such as the chances to make losses within the shortest time possible, limits the trading time-frame and hence precludes other instances where traders can make profits.
Swing currency trading strategy
The approach entails trading different currency pairs for many days with an anticipation that the base currency will gain over the other. Profits are made within the shortest time possible. Traders are expected to be checking on the bars after 30 minutes or 60 minutes to assess the movements of the trade. The main advantage of this strategy include a longer time frame for traders to evaluate the economic conditions. This is crucial making informed decisions on which pair of currencies to sell or buy. However, over a long period, the technique can result in big losses , especially, when drastic changes occur.
Day trading currency trading strategy
This is a typical short-term currency trading strategy that involves holding a given pair of currency for minutes or even an hour. The method is similar to swing trade as both share key similarities concerning the time is taken to buy and sell a given currency in preference to another. However, it differs from swing approach as its faster. Some of the high grounds include the absence of overnight risk and high profits during the day when stock markets are active. Some of the cons include stressful in monitoring markets regularly during the day, substantial opportunity costs and a high chance of losing money within a short period.
Scalping currency trading strategy
The strategy involves participating in highly short-lived trades which can be one within seconds or a minute. Under this approach, a pier of currency is likely to be traded for a short time frame such as one minute. The motivation behind this strategy is for traders to swiftly take advantage of the bid or offer spread and make profits before the day closes through the use of tick charts. The focus is to assess the current market condition and utilize it to make profits.
The method has high transaction costs and hence not recommended for retail traders as the overheads can reduce profits significantly. Some of the pros include many trading opportunities within a short period and the possibility of huge profits. The cons attached to it has huge financial costs which include paying for software used and news-feeds among other services that the trade applies. Lastly, the strategy is stressful as one has to keep checking the news-feeds and trades frequently for many hours to avoid losses.
Positional currency trading strategy
This is another form of currency trading strategy that entails traders holding a pair of currency for an extended period such as week or months. Trading can be done daily or weekly based on the current market conditions. Under this approach, traders are required to make a critical analysis that will enhance their trading such as GDP and NFP. Technical analysis is also essential for making decisions on whether to sell or buy a specific pair of currency.
In summary, currency trading is a risky practice and the need to select the best trading approach is insurmountable for traders. Consequently, it is advisable for traders only to apply those strategies which will minimize loses while maximizing returns.