There isn’t a single strategy for success in trading in the financial markets. The markets are similar to the ocean, and the trader is similar to the surfer. Surfing requires skill, balance, patience, proper equipment, and awareness of the environment around you. Would you choose to swim in water that had dangerous rip tides or was shark-infested? Hopefully not.
Trading in Forex markets demands a different attitude. When you combine sound analysis and effective execution your chances of success will rise dramatically, like many skill sets the best trading is the combination of skill and perseverance. These are the most effective strategies for any market. But, this post will focus on Forex markets.
Forex Trading: How to Approach
Before trading, be aware of the value of proper preparation. It is essential to align your personality and goals with market instruments and markets. If you’re able know the market dynamics of retail and their underlying principles, it’s a good option to invest in retail stocks rather than oil futures. It is also helpful to consider the following aspects prior to beginning:
The Forex market is extremely accessible to individuals due to its low commissions. However, before you trade ensure that you have a an understanding of what is the Forex market is, and the smart strategies to navigate it. Learn the basics of Forex trading, and check out examples from the Forex Trading for Beginners course from Investopedia Academy.
Time Frame
The time frame is a sign of the kind of trading that best suits your personality. The use of a five-minute chart suggests that you’re more comfortable taking a position without exposure to overnight risk. However the choice of weekly charts indicates the ability to handle overnight risk as well as the willingness to let the days when you are not in your strategy.
Also, think about whether you’re able to devote the whole day front of a computer screen or prefer to research during the weekends. Then you can make an investment plan for the coming week based on your analysis. You must remember that Forex trading is a long-term endeavor. Short-term scalping, as it is known is a small profit or losses. In this case you’ll need to trade more often.
Methodology
If you decide to select a particular time-frame, make sure you have a consistent methodology. For example, some traders prefer to buy support and sell resistance. Some prefer to purchase or sell breakouts. Certain traders prefer using indicators such as MACD (moving Average Convergence Divergence) or crossovers.
After you’ve chosen a system or method, try it to determine whether it performs in a regular manner and offers an advantage. If your system is reliable at least 50 percent times a day, you need to take that as an advantage even if it’s only an insignificant one. Try a few different strategies and, if you discover one that has a consistently positive outcome, stay with it and test it using various instruments and various time frames.
Market (Instrument)
You will find that certain instruments trade much more orderly than other instruments. It’s difficult to design an efficient trading system when you have chaotic instruments. It is therefore essential to run your system on multiple instruments to determine that your system’s “personality” matches with the instrument being traded. For instance, if were trading the USD/JPY currency pair on the Forex market, you may observe that Fibonacci support and resistance levels are more reliable.
Blackstone Futures Broker is the best place to begin trading forex if you are looking for these strategies.
