Forex Investment Strategy
Forex is definitely the most widely traded commodity worldwide. The main currencies traded are: EUR/USD, USD/JPY, GBP/USD, USD/AUD, USD/CHF and USD/CAD; they make up the bulk of currency trading. While the barriers to entry are low and there’s a round the clock market for major currency pairs, generating a profit in the forex market can be challenging, especially without a good investment strategy. The challenge for many is defining a strategy. Invest with the best forex system.
Fundamental vs Technical Analysis
There are two primary ways of thinking in trading strategy: fundamental and technical analysis. The strategies you employ depends upon the asset being traded. While fundamental analysis helps to identify the general direction of a nation’s currency, it’s generally not as helpful to the trader as technical analysis in forex. This is because of the high liquidity in the market. It’s not unusual to be trading in less than tenths of a cent. With increments this small, visual aids (technical charts) can help a lot more than fundamental indicators (inflation rate). View a one minute, one day, one week, and one month chart of the same currency. Take note of pivot points (points when the currency changes direction) and support (bottom) and resistance (top) levels. Managed Forex Accounts: Global FX & Strategy Review for the week ending August 19, 2011, visit our forex blog.
Demo Account
Set up a demo account. Try a minimum of three demo accounts prior to signing up with a broker. The trading platform can play a huge part in the execution of your strategy. For most traders it might define the strategy. Some platforms might seem more intuitive while others will offer you more up-to-date data feeds. Ultimately, the platform you choose should play to your dominant strategy. Make a few trades in each platform, compare spreads, and make a consistent profit before opening up a live forex account.
Stop-loss
Trade with insurance. Setting a stop-loss is a little like buying health insurance. You don’t want to get sick, but if you do, it is nice to know you are prepared. A stop loss is an order set at a certain price which will automatically unwind an order if the price is hit. Use shorter ranges for shorter duration trade windows and longer ranges for longer duration trade windows. It might hurt to hit your stop-loss, but at least your book will live to trade another day.
