In the foreign exchange market, there are several
different forex trading strategies from which to choose. No forex trading
strategy is perfect; different strategies work well for different traders. When
it comes to choosing forex strategies, consider what type of trader you are.
Once you identify and correlate your personality to a specific type of trading
style, you can start investigating different trading strategies that fit you
and your style of trading. A few strategies are outlined below.
Proprietary trading means using one’s own money in trading
activity to make a profit. Proprietary traders are banks, corporations, even
brokers, although they are mainly in the business of trading with client
capital. Individual traders can relate to this, as they are also proprietary
traders. All proprietary traders have the ability to trade on the same
information from fundamental announcements that the banks do. Essentially, all
individual traders –
with few exceptions –
are proprietary traders.
Fibonacci trading uses mathematical patterns to
associate past market behavior with potential future market movement. Although trading
the Fibonacci numbers in most cases can be very accurate, some traders use the
Fibonacci trading in concert with other trading strategies to improve accuracy.
Trend trading is another strategy that tries to
capitalize on long-term moves or trends in the market. A subset of the
Fibonacci method called the ABCD pattern is a form of trend trading. In most
cases, these methods can be very profitable; however, they can also represent a
much greater risk.
Contract for Difference – or CFD Trading – is similar to what is also known as “hedging” in other markets. Contracts For Difference
are traded between individual traders and CFD providers (brokers). The CFD is
started by making an opening trade on a particular instrument with the CFD
provider. This creates a ‘position’ in that
instrument. There is no expiration date, so the position is closed when a
second reverse trade is made. At that point, the difference between the opening
trade and the closing trade is paid as profit or loss.
These are just a few of the several different trading
strategies to choose from in the forex market. Committing a good amount of time
deciding what kind of trader you are (or want to be) and identifying your goals
is the key to finding the right strategy for you.
ForexTips.com is committed to educating the forex
trader in all aspects of foreign currency trading. Click hereto get information on a free forex webinar to help
you maximize your success in the forex market.
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