Forex trading involves a lot more than just pulling up a forex broker’s Web page and funding an account. Traders need to spend some considering just what kind of forex trader they want to be and that means the answer is more than just being a profitable forex trader. Forex trading is all about making money, but almost as important is the methodology a trader uses to obtain those profits. There is more than just one forex strategy out there and traders need to establish exactly which forex strategy is going to work for them before throwing real money at the market.
Some traders will stock to one forex strategy as soon as they identify that it works for them, while others like to tinker among several strategies before deciding on one. Other traders may use a combination of several different forex strategies on a daily basis and that can work, too. Some traders prefer technical analysis where they study chart patterns and indicators. Others are fundamental traders that follow economic news events. And of course, there are several different ways to approach trading. You can be a day-trader, a swing-trader, scalper or long-term investor and so on.
The most important to thing for new forex traders to remember is that a lot of one’s success with forex trading lies with selecting a forex strategy that works for you. You may have a friend that successfully trades forex, but his forex strategy may not work for you. The best forex strategy for you is the one you’re most comfortable with. And remember that no empirical evidence exists to suggest that one forex strategy is superior to another in terms of making pips.
To be sure, the recipe for determining the best forex strategy for you is going to have several ingredients. If you’re a technical trader, you’re going to have learn at least a few of the major chart patterns like the head and shoulders, reverse head and shoulders, double top, double bottom, ascending triangle and descending triangle. You’ll also need to establish what indicators you want to use with your trading (MACD, RSI, Stochastics, etc.)
On the other hand, a fundamental trader might want to pick a few of the major economic news events to trade around because there are simply too many to follow. Perhaps you’ll decide on Federal Reserve interest rate decisions, U.S. and Eurozone unemployment data and U.S. and U.K. GDP news. This gives you plenty of regularly released data points to trade off of without becoming overwhelmed.
The bottom line is selecting your forex strategy on par with selecting a forex broker and deciding on how much money to initially fund your account with. There are plenty of resources all over the Web to help you make your decision and we suggest you explore as many of these avenues as possible before committing to any forex strategy. A little homework at the beginning can save you from some big losses in the end.
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