Forex Trading Strategies

If you are a potential trader wanting to make it big in business and investing but without big capital to start with, forex trading is for you. 

Forex, also known as the foreign exchange market, is the largest financial markets in the world with $1.5 trillion turnovers every day. 

With that said, here are 7 strategies on how to profit consistently.

1. Know Your Market

The best way to get advantage, earn profit and minimize losses is to familiarize yourself with the market and how the whole system works. 

In the forex market, the players are usually commercial and central banks as well as firms involved in foreign trade, investment funds, broker companies and other private individuals with large capital. 

With the speed and high liquidity of asset, most companies engage in this business than in any other trading venture. 

Transactions are done in a jiffy; there are no membership fees and there is always the allure and promise of big, big profit. 

Trading is done in pairs. 

The commonly traded currencies are US Dollar, Japanese Yen, Euro, British Pound, Canadian Dollar, Australian Dollar, and Swiss Franc. 

While commonly traded currency pairs are USD-JPY, USD-CHF, USD-CAD, NZD-USD, GBP-USD, GBP-JPY, EUR-USD, CHF-JPY, CAD-JPY and AUD-USD. 

In Forex trading, everything is speculative. 

There is no actual product being sold or bought. 

The activity mostly consists of computed entries made on the value of one currency against another. 

Say for example, you can buy Euros with US Dollar, hoping that the Euro will increase its value. 

Once its value rises, you can sell the Euro again, thus earning you profit. 

2.  Learn Currencies’ Language

There are 3 concepts you need to know in the currency market. 

Pips refer to the increase of one hundredth of a percent of the value of the currency pair you are trading. 

Usually, each pip has a value of $10 or $1. 

Volume is the quantity or amount of money being traded at certain time in the market. 

Buying is the acquisition of a particular currency. 

A trader buys with the hopes that the price of the currency will increase. 

Selling is putting a currency up for grabs in the market because of a potential or possibility of a decrease in its value. 

There are also 2 techniques of analysis usually used in this business - the fundamental and the technical analysis. 

Technical analysis is usually used by small and medium players. 

Here, the primary point of analysis revolves on the price. 

Fundamental analysis, on the other hand, is used by bigger companies and players with higher capital as it involves looking at the other factors affecting the value of a particular currency. 

In this type of analysis, the player also looks at the situation of the country, particularly issues like political stability, inflation rate, unemployment rate, and tax policies as these are seen to have an effect on the currency’s value. 

3.  Develop A Sound Trading Strategy 

Your trading strategy depends on what kind of trader you are. 

The basic thing with developing a trading strategy is to identify what kind of forex trader you are. 

A good trading strategy should lessen, if not, eliminate losses. 

Plan also the size of your transactions. 

It is better to conduct many different trades than one huge transaction. 

Not only does it develop discipline, but it also lessens any possible loss as only a fraction of the capital is affected. 

Part of a trading strategy is developing the values of discipline and proper money management. 

4. Practice With Paper Trading

Try paper trading, a great way to practice your skills, see how the market works and get acquainted with the software and tools being used. 

There are online brokers who allow free paper trades, which allows practice and experience before doing it with real money. 

5. Choose The Right Forex Dealer

Make sure that they are regulated by the law. 

Take note of dealers with investment schemes that give out too-good-to-be-true-just-false-hopes promises. 

Look at investment offers before getting started. 

6. Proper Risk Management

While making profits is important, protecting your capital is even more important. 

The ideal way is to risk 2% of your capital with Stop Loss (SL) and Take Profit (TP) on every trade. 

Regardless of how much capital you have in your account. 

7. Double Account Hedging

If you traded with just 1 live account, there is a strong possibility of you losing consecutive trades even with the best strategy and risk-to-reward management. 

So instead of just trading 1 account to buy or sell without certainly whether the market goes in your favor, why not trade with 2 accounts instead?

One account and the other to buy. 

This way, no matter which direction market goes, you are certain to make profits from either one of 2 live trading accounts. 

While still sticking to risk management of setting aside 2% of your capital, Stop-Loss (SL) and Take Profit (TP) on every trade. 

Having said that, forex trading may seem easy and manageable. 

But it requires more than just a keen and sensible head for business. 

It is all about having a common sense gameplan with various strategies.

To profit whether the market goes up or down.