In order to be successful in FX trading, a currency trader needs to follow a solid forex trading strategy. But unfortunately many forex traders learn by trial and error. They invest some money, dive in and lose their shirt. They try again, with a little more knowledge, and don't lose so much this time. This continues until the trader finally is an old pro and understands the market. Anyone who wants to go this route is welcome to, but it is much more costly and painful than learning from those who went before you. Below are the best forex strategies. Avoid the long, painful trial and error process and start thinking like the pros right away!
Before getting involved, study the market. You will find that there are patterns and certain logic to the markets but not all the time. Understanding odds and probabilities will help you be successful. Keep in mind this is not an exact science but there is a systematic process at work.
Another best forex strategy is to chart potential trades and keep track of key indicators. When indicators all point in the same direction, there is likely an opportunity to make a profit. You will want to be able to plot indicators such as moving averages (average value over a set period, shows how much “momentum” the currency has), the Relative Strength Index (RSI measures momentum using a number of excessive buy or sell indicators), stochastics (prediction algorithms based on past performance) and moving average convergence/divergence (the MACD, a momentum indicator, shows the relationship between two moving averages). Using such indicators, you will develop your own charts. You can also add in other predictive indicators.
One of the powerful forex trading strategies is to look at the forex indicators carefully. If all of your key indicators point in the same direction, it is a good time to get in the market (entry point). Set a specific point at which you will either cut your losses or take your profit. This is called the exit point. Set this point before trading.
What it all boils down to is risk management. First, you get all the facts and find the highest probability of success. Then you determine the best time to acquire and sell. In order to make a profit, though, you have to be judicious with your investments. Because even the highest probability that a trade will succeed can still not pan out, you need to “cover your bets.” Avoid putting “all your eggs in one basket.” Spread out your investments among several high probability positions. If any one of the forex trading strategies does not work out, the chances are in your favor that others will.