In foreign investment, the development of forex trading strategy is very important, just entering the market, many traders will soon confused - I do a day trader, swing trader or a long-term trader?
Singapore's well-known independent traders Rayner Teo has introduced five effective Forex trading strategy in an article, namely: position trading, swing trading, day trading, ultra-short-term trading and excessive trading strategies. These five trading strategies have advantages and disadvantages for different investors, ATFX small series focuses on is the development of a suitable, effective trading strategy that can bring more or is more stable returns to investors.
To develop their own trading strategies must first determine their own transaction types, different investors have different trading purposes, the types of transactions will surely be different, each investor prior to the development of foreign exchange trading strategies are best for their the amount of money to invest, time, and so have the idea of target revenue determined. In foreign exchange trading can not "drift", as it is easy to miss the opportunity to profit.
Secondly, when the development of foreign exchange strategy, we also need to pay attention to their own to do a single direction, according to different trading period, we will be divided into three Forex Trading: Forex trading short-term, foreign currency neutral, foreign exchange long-term deal.
Its trading day trading period is usually, we usually say scalping, ultra-short-term, high-frequency trading will be short-term trading, short-term trading to accumulate by winning the short term to produce significant benefits.
Ultra-short-term trading as an example:
Ultra short-term traders need attention all the time in the market, they use major trading tools that order flow, it displays buy and sell orders in the market to the user.
This trading strategy has advantages and disadvantages. The advantage is there are a lot of trading opportunities every day, skilled trades is a master of using this strategy can earn ten times or even dozens of times profits. But it is not a perfect strategy, can bring high returns mean high risk.
Individual traders may have insufficient understanding of the risks of this strategy even know nothing about. After many individual traders use this strategy when making a deal are often earn a few pen smiling profits end up in a warehouse explosion. To conclude, this ultra-short-term strategy there are four major risks:
Predict the number of point-to-point dozens of price fluctuations is very difficult;
Algorithmic trading development make people at a disadvantage;
Spreads costs caused;
Dual physical and psychological pressure.
Relatively speaking, we also call the center line trading swing trading. Swing trading is a medium-term trading strategy, your open periods ranging from days to weeks. Time frame transaction is usually 1 hour and 4 hours FIGS.
As a swing traders, typically catches a single trend in the market. Such transactions are common practice are the following: in support to do more, short in resistance, at a breakthrough at the retracement at, or entering transactions in the moving average at the rally.
Thus, for the band trader, learning technical support and resistance analysis theory, K line shape and the like are basic moving average.
This deal also has pros and cons:
advantage:
1, do not have to be a swing traders give up your full-time job;
2, there are a lot of trading opportunities and, therefore, have more profit opportunities.
Disadvantages:
1, can not control the trend;
2, positions held overnight risk.
Long-term deal that is Rayner Teo said trading positions, positions when using trading strategies, you might hold for weeks or even months of the list. According to this trading strategy, your trading time frame is usually daily or weekly.
Such traders in the transaction is very dependent on fundamental analysis, such as non-agricultural, GDP data, horror data. However, they will be to determine the best timing of entry and exit based on technical analysis.
For example: If you analyzed the fundamentals of the euro against the dollar, and the currency is bullish right. But do you think the current price is not a good time to admission. Then you have to wait until the euro against the dollar to reach the support level after admission. If your analysis is correct, you'll be one step faster, admission when a new trend first began.
This trading strategy looks straightforward, here's a look at its pros and cons:
advantage:
1, because it is in the long-term deal, so you do not control a lot of time to spend a day draining;
2, do not care about short-term price fluctuations, the psychological pressure will be relatively small;
3, can increase your risk-reward ratio.
Disadvantages:
1, requires a deep understanding of the fundamentals driving the market;
2, capital requirements are relatively high, because your stop will pull relatively large;
3, due to the relatively small number of transactions, it may not have been profitable every year.
This trading strategy with trend tracking strategy is somewhat similar, the only difference is that the trend is to rely on purely technical track, do not use any fundamentals.
Knowing the advantages and disadvantages of these trading strategies, ATFX Xiao Bian would like to emphasize how risk management it:
When the development of foreign exchange strategy, also need to pay attention to is where risk management. Before trading, financial planning you can bear the risk capital. Usually investors generally 5% of risk capital, ie investment amount of each transaction does not exceed 5% of the total venture capital (depending on their trading case may be). At the same time, we set a stop-loss of control is a great tool to expand the risk. Set stop-loss should be determined according to the procedure of investors, with a stop not overly cautious, it is not self-doubt, in the course of foreign exchange transactions to ensure completely wrong basically impossible, and how promptly when an error occurs stop Out is the key to success in trading decisions. Good stop, is awareness of risk behavior that every investor must have a foreign exchange.
That's all the importance of forex trading strategies in foreign investment in it. Investors want to be helpful.
