Finding the Best FX Rates Trading Strategy
When you trade FX rates you need to have a trading strategy that you are comfortable with. Finding the best strategy can be a daunting task for many new traders. However, there are certain points you should consider with the most important being the type of trader you are. Once you identify the type of trader you are it is possible to narrow down the strategies that you can use.
The Type of Trader You Are
Before you look at the different trading strategies you should consider what type of trader you are. The best way to do this is to consider your personality and the analysis you would feel comfortable trading in. There are three main trader types that you should be aware of:
- The fundamental trader is the first type of trader that you should know about. These traders are often considered to be long-term traders because fundamental analysis generally has a long-term effect. All of these traders primarily use fundamental analysis to determine what the market is going to do. It is possible that they include a small amount of technical analysis as well.
- The technical trader is the opposite of the fundamental trader. These traders use technical analysis as their primary analysis tool. Many of these traders are short-term or day traders and use very little fundamental analysis. True technical traders will not use any fundamental analysis as they rely only on the forex charts.
- The techni-mental traders are a combination of the fundamental and technical trader. These traders are able to trade in any timeframe as they combine the best aspects of fundamental and technical analysis. There are a lot of these traders who fall into the medium-term trading category.
3 FX Rates Strategies to Consider
There are a lot of FX rates trading strategies out there. It is important that you know about some of them in order to find the one that is right for you. Knowing these three strategies is a good way to start learning about trading strategies and finding the one that best suits your trading style and personality.
The first strategy that you should be aware of is trend trading. A lot of forex trading is done on trends because they are easier to identify on the market and considered easier to trade on. This strategy can be completed by any trader as long as they can identify the trend. The key to success with this trading is to get into the trend early to make the most profits.
The second strategy that you should consider is Fibonacci trading. This is a very mathematical style of trading and is not for everyone. It is best that you like mathematical calculations if you are looking at this. Many traders do not consider this to be a strategy on its own, but rather a pattern indicator which should be combined with other trading strategies.
The last strategy that you should consider is scalping. Scalping is a commonly used short-term trading strategy where the trade does not last longer than 5 minutes. These short trades offer very small profits and need to be used with leverage or completed multiple times a day. Many traders consider scalping too dangerous for new traders and recommend not using this.