Choosing Your Voluntary Trading Strategies
In forex trading, a well-defined trading strategy is a well-defined plan which is intended to achieve either a high or low return on investment by entering or exiting particular markets. The reasons that a correctly studied trading strategy helps are its objectivity, reliability, consistency, and consistency. A trading plan without these three characteristics will not be able to provide a trader with the profits and trading gains he or she aims to have. It also may not help in achieving long-term profitability.
In technical analysis, trading strategies based on forex market indicators are very useful. These include trend analysis, support and resistance levels, breakouts, patterns, oscillators, Fibonacci levels, help points, momentum indicators and other similar technical indicators. These technical indicators help a trader identify appropriate trading strategies. There are various types of technical indicators and a trader can choose among them depending on his or her needs. Some of the most popular technical indicators used by forex position traders include relative strength indices (RSI), moving average convergence (MACC), moving average convergence divergence (MACD), Japanese candlestick index (JCPI), simple moving average (SMA), and exponential moving average (EGM).
Some of these trading strategies can be used for day trading. However, it is still necessary to maintain adequate stop loss orders. Also, since forex markets move quite fast, for position traders should be able to keep a very close eye on changes in the market price movements. To deal effectively in a volatile market condition, the trader must use rapid and flexible price action strategy. This kind of strategy would be perfect for scalping, which involves short-term aggressive trading.
Other forex trading strategies include simple strategies and discretionary strategies. Simple strategies are those that are based on simple rules and they do not require any high degree of automation. For instance, a trader can choose to develop a winning trading strategy by following simple rules like selling when the price reaches the low, buying if the price reaches the high, and holding position when the price reaches the peak. In a discretionary trading strategy, a trader has the choice to either enter or exit a trade depending on his or her opinion that the price will go up or down. If he or she correctly predicted that price will move up, he or she can sell while the price is still high; if he or she predicted that price will move down, he or she can remain in the position.
There are various kinds of trend indicator or counter trend strategies for traders. Some of these strategies involve the use of moving averages or oscillators. These are usually used in conjunction with other kinds of trading strategies. In moving averages, an initial trend is identified. The analysis of this trend continues as the value of the moving average index is updated. When the value of the moving average index crosses a certain threshold, it is considered to be the beginning of an uptrend or a downtrend.
One of the most widely used trend indicator or counter trend trading strategies is the statistical method. This kind of strategy uses past market data to forecast future market prices. It employs technical and fundamental analysis techniques. The main advantage of using this strategy is that it provides consistent profits with little or no risk. However, there are also some disadvantages to this type of trading strategies for professional traders.
One of the main advantages of the statistical strategy is that it is based on past market prices and trends. The disadvantage of this strategy is that it is affected by extraneous factors such as human emotions and tendencies. Another disadvantage is that it takes longer time to generate reliable results. Another strategy that is based on the statistical method is the technical trading strategies. These strategies are very popular among technical analysts and they are ideal for day traders. However, they are not suitable for long-term trading.
Some of the popular discretionary trading strategies include fundamental analysis, technical analysis and news-driven trading strategies. Fundamental analysis is considered as a very good trading strategy for new traders and it is ideal for traders who do not want to take too much risk in their investment. Meanwhile, news-driven trading strategy makes use of technical indicators and this strategy gives traders some options on their market entry. News-driven trading strategies may also be suitable for traders who want to minimize their risk, while at the same time maximizing their potential profits.