Forex Trading Strategies – Which One You Should Use?

Posted on August 31, 2010
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If you have tested or do real trading for some times, you must realize that there are many forex trading strategies that can be applied. Each of it has its own advantages and disadvantages, ask for different data and condition, and will show its true potential in particular currency pair.

Basically, forex trading strategies can be divided into 2 major:

1. Technical analysis

This strategy relies heavily on data, mainly charts from previous market movements to forecast the future direction of prices. You will find various strategies to read this data like candlestick charting or Elliot wave, but essentially they look for patterns in the chart for a certain timeframe and searching for relationships among several indicators like price and volume.

This strategy is preferred by most traders and they put it to use in regular basis to determine the best opportunity available presently. In most cases, each trader has their own personal way to interpret the data by using various variables that developed especially for a particular market he is in. That’s why even when everybody gets the same accurate data, only the one with the right method can convert it into profits.

2. Fundamental analysis

This strategy is executed by analyzing various economy factors like interest rate, production, payroll, management, and overall state of economy to make entry and exit decisions. For instance: several news like Non Farm Payroll or Wholesale Inventories can affect the market greatly. If you can predict where it will be headed before the news released, you can gain a lot of profit.

Some times, some people with high influence in economy state will gather for an important meeting. For instance, a meeting about deciding the new interest rate or inflation will have great impact in the currency values. Usually, it will likely be too late to enter the market when the result has released, so you must make use of the current data to analyze and speculate the result ahead.

Not only short term trading, fundamental analysis can also be used as a long term forex trading strategies. This is rather complicated, but basically you predict the future trends of the market based on how the new policy will influence the market in long term.

If you are still unfamiliar with forex and looking for a suitable forex trading strategies then I suggest learning technical analysis first, it is the basic of almost all strategies.

Read the four vital aspects in studying forex trading on learn to trade forex.Also, read the facts about a broker with great community for novice trader at another look of etoro.

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