To maintain objectivity in your trading, you need to create your strategy for forex trading. Short term trading is based on tested methods, while long term requires proper money management as you are placing your trades in a wider context.
But, before you get into currency trading website, you should know your trading strategies, as it will help to prevent making significant dents to your trading and your bottom line.
The goal of your trading strategy is to gain long term profits. You need to establish the following:
- The amount of capital investment you are dedicating to forex trading
- Your profit goal after a specified time
- The amount of capital investment you are allotting for risks per trade.
- The ratio of risk-reward that you want – like target return level per trade.
Your strategy is made up not only of the capital investment that you have, but also the risks you are willing to take and how you will manage them. Your strategy can be high risk, high return or low risk small returns per trade.
There should be a connection between your ratio of risk-reward per trade and your profit goal for long term in your money management strategy.
When choosing pairs, stick to a select number and choose ones that you understand well and are comfortable to trade.
You can opt to trade the major forex pairs with high levels of liquidity and low trading spreads like – USD/JPY, EUR/USD and GBP/USD or exotic minor pairs. You can find a wide array of research regarding the major forex pairs that you can use.
Trading on News
Individual currencies are greatly affected by economic data releases and political events as they are geopolitical entities.
Including news in your forex trading strategies would require reliable news feeds. You would also regularly monitor news for both scheduled and unscheduled economic events and releases and track the impact of those events on your chosen forex pair and make it a routine.
Timeliness is the key to trading in news, where you need to stay ahead of current news and capitalize on it before the market does.
Using technical indicators in your forex chart allows you to determine whether to buy or sell with the use of signals. You can utilize different indicator combinations that you can incorporate with your trading strategy.
It is ideal to follow entry and exit points generated by a system to give you a heads up when to get your profit. Before incorporating anything into your strategy, it is wise to first test that system against historic price data. Check the positive results generated by the system generated signals.