5 Effective Forex Trading Strategies

5 Effective Forex Trading Strategies

When a beginner enters the currency exchange (Forex) market, he becomes confused and doesn’t understand which trading strategy he should follow during the trade. There are various strategies in this online business, and they are – position trade, day trade, scalping, swing trading, news trading, and so on. They become frustrated as it is quite hard to choose the most effective strategy as a newbie. Don’t worry because we are going to highlight the most important and fundamental issues of each strategy.

Popular Forex trading strategy

1.      Position trading

In this business approach, a trader can retain the purchased financial instrument for a few weeks or months. The timeframes that the investors choose generally varies from daily to weekly. These people need to rely on the fundamental analysis to predict the approaching fluctuations of the industry. If a novice can investigate and find out the accurate result, he can quickly enter a potential spot, bringing him profits.

Pros

  • Traders don’t have to spend their valuable time looking at the screen.
  • They will have less stress and can do relax.
  • The risk to reward ratio is favorable in this strategy.

Cons

  • Beginners should acquire sufficient knowledge about the fundamental analysis.
  • Investment should be larger since the stop-loss is wider.
  • Fewer opportunities to trade.

2.      Swing trading

It is a popular and common Forex trading style, and many experts suggest the novices to use this plan to develop the business career in this currency exchange industry. In this style, the beginner can retain his purchased currency for a few days or weeks. These people are most conscious about the single move, which is quite potent. The newbies should acquire basic knowledge about technical indicators like moving average, resistance and support, and candlestick patterns.

Pros

  • One can do it alongside his job.
  • More chances of trading.
  • It is possible to make good profits from this strategy.
  • There is no need to keep looking at the screen after buying the currency.

Cons

  • Slower result
  • Overnight risk
  • Less probability of riding a bigger trend

3.      Day trading

It is one of the short-term styles because an individual has to sell his currency within the same day he buys. The timeframe can range from a few minutes to hours. These people face the volatility that occurred within the day. It is advised that the traders should catch the most volatile period to grab a potential entry point. You have to be an expert technical analyst to be a successful day trader because the fundamental analysis will not help you in this short timeframe.

Pros

  • A couple of successful deals can beget decent profits.
  • There is no overnight trouble at all.
  • One can get a quicker result.

Cons

  • This type can be very stressful.
  • A massive slippage can blow the account.
  • You must keep observing the graph.

4.      Scalping

Professionals warn beginners to avoid this style because it can be dangerous and too challenging for them. Scalping is an extremely short-term business strategy, and you may have to retain the currency, whether for a few seconds or a few minutes. It means that during this moment, you must find out the potential spot to make money. It is indeed a challenging task for the beginners as they have little knowledge about the technical indicators. One wrong decision can cut off the chances to get profit.

Pros

  • One may get several chances of trading.
  • A trader can make a handsome amount of money.

Cons

  • The individual must have to keep looking at the screen.
  • It can create an extremely stressful situation.
  • Not for the novices

These are the primary four Forex business strategies for the newbies. They can use a demo account and practice using each plan. Stick to the demo platform as long as you need. But don’t trade with real money unless you are confident with your trading approach. Take your time to know more about this business.

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