Forex Strategies

Forex Trading Strategies For Beginners

There are plenty of strategies used for trading on Forex market and most of them require specific skills and experience. But some Forex Trading Strategies are quietly suitable for novices and can bring positive results at the beginning of trader’s career. One of such strategies is News Trading Strategy. You can try it on demo-account not get sure it works in current market conditions.

It is generally known that financial news can influence the market even if it is only an unproven rumor. A trader should be selective in the range of everyday news to use only those that give a very good start and causing significant currency rate move. This is one of the Forex Trading Strategies based on simple information analysis, when trader tracks news about the country whose currency he is going to trade. If you would like to deal with British Pound and US Dollar, track the UK and US financial news, including retail sales, GDP and PPI, trade in goods, real estate sales, export/import, etc.

Each week you need to receive Forex news calendar and point the news items that will be used for trading. You should track the situation on a market at least 5 minutes before the news publication. If the currency pare rate (like GBPUSD) remains stable during the specific time interval, most likely it will significantly change after the news will be published. However the move can be either up or down, it is more difficult to predict.

Using such Forex trading strategies like trading news, you should remember about cycles that consist of phases of high, middle and no reaction on financial news. The best news are unexpected ones, they stimulate the rate change up to 200 points at a time. If you catch the trend, you are able to get high profits from such currency exchanges. Trading news strategy is not often used by professional experienced traders, however it can serve as a good start point to understand how the exchange market is functioning and react to different changes.

Forex Day Trading

Day trading differs from swing trading or position trading in that whatever position the trader puts on he takes off during the same trading session. The trading day is divided into three trading sessions, and nobody can trade all three, therefore; a big advantage with respect to risk management is inherently built into any day trading system. That advantage is the freedom from having to worry about large losses brought about by unexpected market moves that happen “after hours”.

Those who engage in position trading operate under disadvantageous conditions which include having to take into account the possibility of being needlessly stopped out of the market during a relatively slow off-hours trading session. Because of this, the position trader has to take into account several addition factors when calculating where to place a protective stop loss order. The Forex day trader avoids this totally.

It is not uncommon for large position traders to employ market hedging strategies that involve the purchase of option contracts as a form of insurance against adverse price movements that might take place after trading hours. Because the Forex markets are open 24 hours a day, just about anything can happen after any one Forex session has closed, therefore; protection against a major adverse price move is needed.

Large institutional position traders often satisfy that need by purchasing puts or calls to tide them over until the next trading day. The purchase of option contracts for hedging purposes costs money and has to be taken into account during profit and loss (P&L) calculations. Those market participants that employ a Forex day trading strategy do not have this kind of exposure, and do not have to concern themselves with hedging after-hours risk.

Forex day trading professionals learn across time to become very artful with respect to understanding market momentum, and riding short-term market trends. They have to because it is their “bread and butter” so to speak. Most very large market moves occur during the opening or change of trading sessions long before the day traders have any chance of getting in.

The position traders tend to feast on these moves, and the day traders tend to miss out, but they do make up for this by skillfully trading the retracement market action which so commonly follows a vigorous early-session market spike. Even better is the knowledge that more often than not this is a much less volatile and less risky proposition.

Forex Brokers

There are many choices of Forex Brokers available. It may seem like it would be hard to choose one, but the choices will become easier if it is narrowed down a little bit. The first thing a trader should do when choosing a broker is to determine what type of broker will meet the Forex trading needs. These are some of the types of brokers that can do Forex trades:

Retail Market Forex Brokers

A majority of Forex brokers will fall into this category of broker and is the most safe to use, especially when starting out as a Forex trader and are legal in most countries. They have direct connections or intermediate connections to the Forex market.

Institutional Market Maker

For a broker with a direct connection to the Interbank market, this is the best type of Forex broker and is a good choice for new traders that have a large amount of money available to bet in trading.

Bucket Shop Forex Brokers

These brokers bet against retail brokers and have no access to the Forex market. Some circles question the legitimacy of these brokers. These brokers benefit when the trader looses and most traders avoid this type of Forex broker, especially new traders because they often strip money from a smaller trader.

Book Maker Forex Brokers

This is the type of broker that makes money from the difference between the profit and loss, so there are some similarities to the bucket shop brokers, but the book maker doesn’t profit from loss. The broker doesn’t have access to foreign currency and book makers are not legal in some countries.

Institution Forex Brokers

These brokers only do trades for banks so individuals will not have access to their services. They are directly connected to the Forex market.

It is wise to take time choosing a broker from the many Forex brokers that are out there.

Forex Market

Many people try to trade foreign currencies but don’t know how to go about it. Trading foreign currencies can be very beneficial to an investor as it can provide outsized returns, can provide protection from too much exposure to a specific currency through foreign currency hedging, or can provide a company with the ability to invest in a foreign market while avoiding specific company risk. For example, an individual or company can trade foreign currencies to gain on the fluctuations of foreign markets.

A company can also hedge their exposure to a foreign currency. In other words, if a company has sales in one country and is susceptible to a decline in the currency, then by betting against that currency and in favor of a different currency, a company can reduce their exposure to the currency.

Finally a company or individual may think a currency will increase in value due to micro or macro economic factors. However, they may be worried about investing in a specific company for fraud concerns. As a result, they may choose to invest in the currency rather than in a company situated in that country.

There are many ways to invest in foreign currencies. The simplest is to purchase and hold funds in the denominated currency. However, there are storage costs associated with holding these currencies as well as the risk of theft or loss.

The easier ways to invest in foreign currencies is through investing in the Forex Market. The Forex Market is simply an online trading model that allows you to trade foreign currencies in real time. The Forex Market also allows an investor with the ability to flip currencies quickly and to profit off of quick currency changes.

Foreign currencies fluctuate all the time which can either be to your advantage or may hinder you or your company. Trading foreign currencies can be daunting at first. However consider investing online in order to benefit from the modern benefits of trading foreign currencies instantly.