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Strategies for Trading Forex Online
There are a number of potentially profitable strategies for trading Forex online. The strategies that one uses are usually based on his or her experience and skills as well as the market at hand. Traders should be knowledgeable as to the fundamentals that drive the currency pair or pairs that they trade. They should be skilled in the technical analysis of Forex pairs. The particular strategy will usually follow once a skillful trader assesses the market.
What is going up tends to continue going up for a reasonable period of time. What is going down tends to continue in a downward course for a period of time. This is the gist of trend trading of Forex pairs, the first of our strategies for trading Forex online. To the extent that a trend continues for day, weeks, or even months, a trader can make small but steady profits in trend trading. In general, a trader uses this approach when he believes that the fundamentals support a continued upward or downward trend. He or she will typically wait for a market pull back and buy, doing this repeatedly, until the trend appears to be exhausted.
Following and Reacting to the News
To the extent that a trader can predict changes in fundamentals he can trade foreign currencies very profitably. To the extent that he is skilled at technical analysis of major Forex pairs and minor currencies he can profit from the short term market inefficiency that is the result of the Forex news. This is the more common way to make a profit from the Forex news as price over shoot both up and down before settling into a new market consensus.
A contrarian in Forex trading firmly believes that all trends will stop and that the market always over reacts to the news. He or she knows from experience that many other traders jump on the band wagon, so to speak, of a trading situation. Because late comers want to make profits too they tend to overstay their welcome in the market and drive prices too high or too low. The contrarian Forex trader typically engages in profitable currency trading at the end of rallies or market slumps when the market has overshot the fundamentals. His strategies for trading Forex online are steeped in fundamentals and a suspicious view of the market.
Scalping Forex Profits
One of the common strategies for trading Forex online is scalping. The trader sits at his trade station, uses technical indicators to predict very short term market moves, and enters and exits trades without waiting for great profits. This can be tedious work for some but is quite profitable in the hands of a skilled Forex trader.
Staying in the Channel
Channel trading in Forex is similar to contrarian trading. The trader knows from his analysis of fundamentals that a currency pair should be trading within a given range.