Monday, January 18, 2016

Financial Goals and Forex

There are many reasons why one would choose to venture into the exciting world of Forex trading. Perhaps a bit of supplemental income is required or an individual is looking to become a full-time trader. One attribute of the Forex markets which separates them from more static positions is that a number of different strategies can be employed to accumulate wealth over time. Let us examine four strategies to meet and exceed even the loftiest of financial goals.

Day Trading

Day trading is perhaps the most widely known strategy. This process involves the buying and selling of currency pairs within a short time frame. The theory behind this method is that small profits can be accrued and placed towards additional trades. Traditionally, it is rare for a position to be held at the end of a trading session. Thanks to such a liquid marketplace, day trading can produce powerful results.

Financial Goals

Position Trading

Otherwise known as buy-and-hold trading, this approach embraces a more long-term methodology. Longitudinal charts such as those which focus upon weekly and monthly movements tend to be preferred while market fundamentals will be analysed more closely than would normally be the case in terms of day trading. Those who base their investments off of trends often search for higher highs and lower lows in order to maximise their positions. Thus, benefits can be enjoyed on both the upside and the downside of the markets. This will primarily depend upon which direction the trader believes the security will move.

Swing Trading

A swing trade will occur when a trend suddenly reverses (such as the dollar hitting a resistance level and a sell-off taking place). The intention behind this method is to take advantage of the short-term volatility often seen within such an environment. These trades can be held for more than a day but they still do not classify as a positional approach. Traders will frequently utilise a combination of both fundamentals and technical analyses to appreciate when to buy or sell a certain security. 

Scalping

Scalping involves taking advantage of the gaps that often occur within bid-ask spreads. This differential approach is a very short-term strategy and thus, only a limited amount of risk is involved. Scalpers rarely try to take advantage of large market moves; they are primarily interested in minor fluctuations. As the profit margins tend to be small, scalping is best employed when markets are extremely liquid and numerous trades can be executed within a short period of time. Also, scalping is best used during scenarios with less volatility.

These are four common strategies which countless traders have employed with success. Of course, it is always critical to make use of the tools offered at CMC Markets to maximise profits and enjoy superior levels of transparency during any execution. Those who are just venturing into the Forex sector should study each of these methods in detail in order to determine which is the most appropriate for their needs.

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