Types Of Trade Strategies On The Forex Market

Posted on September 6, 2010
Filed Under Automated Forex Trading | Leave a Comment

Strategy can be divided by the principle of time. It also should be mentioned that the longer strategy is, the less profitable they are, but less risky, demand smaller psychological pressure, more ratio Deposit/Margin, and vise versa.

Long-term strategies. A trader holds a position opened for some days to a months and even longer. This strategy has the lowest risks, it doesn’t demand making momenta decisions, and psychological pressure is not high. But a trader needs rather a large deposit, that has to be more in 5-10 times than margin (the sum that a trader needs to open a position). If a margin is 500 US dollars, for this work a trader needs from 5000 US dollars. This is necessary to hold speculative sharp fluctuations of the rate that sometimes reach from 500 to 1000 points. The second lack is that a trader has to pay for transferring the position. It is rather strange, but the longer strategy is the less attractive it is for beginner traders. This is a very big mistake! Beginner traders should use long-term strategies only. Moreover, you do not have to study technical and fundamental analysis, as in the conditions written above a trader can open a position at any currency and to any side, fixing Take Profit for 100-200 points and there is a high possibility that you get this Profit during a month. Getting more knowledge with time, mastering new skills for predicting, a trader can work reliably and without losses, getting 100% of profit a year and even more. Using this strategy a trader also can devote more time to the private life instead of sitting at the computer watching after graphics.

Medium-term strategy, transactions last fro one day to a week. Everything written above is fair, this strategy is optimal for beginning traders who can not (or do not want) to wait for long. It is potentially more profitable and a little bit more risky, but with the ratio of Deposit/Margin 5-10 is almost completely safe.

Short-term position lasts from one hour to one day. This is a high profitable (potentially) strategy for experienced traders.

Super short-term strategy — it is the most attractive strategy for beginning traders, but at the same time it has the highest risks. Usually it looks like that. tempting to short-term fluctuations of rates at sevral points, a trader start “catching” points at 1-5. For some times it works, and the trader earns 20-30 points. Then fluctuations move against the trader’s position and losses start raising fast. As this work demands making fats decisions and the psychological pressure is very high, only experienced traders can work in such circumstances, but a beginner can do nothing, but only can watch how his/her deposit is getting smaller and smaller and comes to the crash.

Unfortunately a trader can work for short-term periods with small deposits, that’s why a beginning trader who usually has small deposits, always loses.

As in any other niche of life foreign exchange market needs some knowledge.

Of course, you can start forex investment and get quite successful in it. But sooner or later the losses will come. It is precisely when you might think “Why did I fail to start with a good forex trading education?”

This does not imply that after reading even the top materials you will start closing trading positions with huge income, but this knowledge will save you from lots of troubles. And even if you decide to get the assistance of a managed forex account service, still you will make a much wiser decision.

And a final piece of advice – today the web technologies give you a truly unique chance to choose exactly what you want at the best terms which are available on the market. Funny, but most of the people don’t use this chance. In real practice it means that you must use all the tools of today to get the info that you need.

Search Google or other search engines. Visit social networks and have a look on the accounts that are relevant to your topic. Go to the niche forums and participate in the online discussion. All this will help you to build up a true vision of this market. Thus, giving you a real chance to make a smart and nicely balanced decision.

P.S. And also sign up to the RSS feed on this blog, because we will do the best to keep updating this blog with new publications about Forex currency trading.

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