The Forex market is one of the largest markets in the world today. Investopedia states that,
The Forex market provides plenty of opportunity for investors. However, in order to be successful, a currency trader has to understand the basics behind currency movements.
With a reasonably small amount of experience, you can manage to make major gains (and losses). The thing about Forex trading is that it requires a methodology. You may think this is a given, but you would be surprised how many people walk into the market without any idea of how to start, where to start or what sort of technique they will be using to make their money. Here are a few systems of trading on the Forex that have been adopted by various traders across the world.
Scalping
One of the most used methods of trading is scalping. Fxpro notes that,
The procedure of scalping in Forex involves the establishment and liquidation of a position within minutes or even seconds.
Scalping is one of the most-used methods of trading available today. The reason why it is so widely used is because it can guarantee small gains or losses, making it ideal for the investor who does not have a large volume of money to work with. Since the market became available for regular, everyday speculators to dive in with mini-, micro- and nano-lots, this type of trading has seen an upsurge in popularity. The downside of this method is that you need to make many trades in a day to see any significant movement in your investment, and isn’t feasible to people who cannot keep an eye on their trades throughout the day.
Day-Trading
This method is like a full-time job. It requires the trader to be monitoring charts and news and staying current in order to figure out the best time to enter or exit a trade for maximum profit. The downside of this is the same as scalping, in that positions need to be monitored constantly, along with news and technical indicators to determine the best times for trades to occur. It is by far the most scientific of the methods but even so, the market’s volatility cannot be accurately predicted scientifically to any perfect degree of success, and so the day-trader is still left at the mercy of the market’s swing.
Automated Trading
Many Forex traders have started using a combination of day trading know-how and computer automation to make their trading system automated. Technical analysis is the safest method of determining a trade but is still subject to market volatility, so that it is not always viable. However, the right time for a trade can be garnered from a number of overlapping indicators that, according to their state-based properties will suggest a change or swing in the market, and would prompt the traders studying these things to buy or sell as the case may be. Automation uses computer charting software to crunch the numbers and generate the charts based on current market values, then make decisions based on their states the same way a trader would if he or she was reading the charts himself or herself. It can be interesting but this removes an element of human interaction that is necessary to spot some market movements (such as movements based on news stories).
Depending on your trading mentality and your starting bankroll, you will be able to determine the best trading method for you. Automated traders most times go for long-term trades whereas day-traders are split in their trade length. Scalpers prefer short, low risk, high gain trades. Your method is unique to you and will require you to explore all available methods to find the right one.
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