Techniques for successful forex trading

Things happen when there is a proper strategy before starting. A successful person is always known for his excellent plan. So, it is time to start smart work leaving hard work behind, before commencing trade. There are various techniques and tools which will surely help you to decide the correct time for entry and exit in a particular trade. Time also plays an essential role in determining your profit size.

So, here is a brief explanation of various analytical methods followed by traders and market analysts to determine the currency market fluctuation.

Fundamental analysis

Fundamental analysis is the method of using fundamental indicators of the economy to determine the value of one currency concerning another. This value here depends on the exchange rate of different currencies.

A good trader can always rely on the news related to the currency, published in newspapers of their respective country. National Central Bank also publishes the currency outflow and inflow details that might help traders to understand notions for future trade.

Technical Analysis

It is the most crucial factor and is a favorite among many traders. It deals with the in-depth analysis of the past and the present behavior of the currency price on charts and graphs to understand whether the currency value will increase or decrease in the coming future.

This analysis is popular among traders because they think that this fluctuation in the price and market movement highly depends on supply and demand and mass movement of people towards a particular currency and these factors are responsible for setting limits for the upward and downward moment of currency price.

Trend Trading

To avoid risk, many traders follow the prevailing trend while trading. They enter or exit a trade depending on the value of the currency and its position within the trend. If the price of this currency goes up, they sell it, and if the price goes down, they sell.

Trend trading can be done using tools like calculating averages, analyzing direction, using strength indicators and volume indicators.

Range Trading

Range trading works on the prediction of the price range that a currency will fall into at a given time. It is mainly beneficial for the currencies that are not subjected to sudden price changes. So, range trading is best for a stable and predictable market. For range trading, we can use tools such as strength index, commodity channel index, etc.

Momentum Trading

Momentum trading is done on the fact that if the price of the currency will show a remarkable increase then it is likely to follow the same trend. Similarly, its price goes down; then, it will continue to follow the same downward trend. Momentum strategies consider both price and volume and use tools such as oscillators and candlestick charts.

Swing Trading

Swing traders set up their trade on highs and lows which means they trade on "swings". It helps to reduce certain disadvantages which a trader face in intraday trading. Erratic price moments can also be avoided by following swing trading strategies. The period associated with swing trading is from one day to one or more weeks.

Breakout Trading

In the Breakout trading strategy, a trader tries to find out his entry point in trade when the price breakout forms its previously defined trading price range. Suppose this breakout in price occurs at a higher rate than a trader can choose to buy. Similarly, if the breakout occurs at a lower price, then a trader can choose to sell with the hope to buy the currency once again at a lower price.

Reversal Trading

As the name suggests, Reversal trading means turning of a specific price trend. Some trader tries to make a profit by predicting this reverse price trend and act accordingly. It is the riskiest strategy. If a trader predicts accurately, he is most likely to hit a jack port, but one wrong prediction can cause a significant loss to him because it is challenging to spot real reversal.

Day Trading

Entering and exiting a trade repeatedly for a short duration of time to play safely in the market is termed day trading. Day trading is one of the safest strategies where traders aim at small gains and small losses. They mainly start their trade when the market opens and usually close it with the closing of the market to avoid any risk. Some of the features of day trading are limited risk, decreased opportunity cost, and regular cash flow.

Summary

Strategies can change depending on the situation, trading conditions, and personal experiences. You can follow some of the techniques given above. They are listed based on the experience of some successful traders and analysts.

Remember, the one who plays smart makes it at the end of the day. So, work on your strategies and keep enhancing your knowledge of market fundamentals.

I am a Digital Marketer and blogger of the stock market, trading online and also providing tips to trade. Now you can get all the tips and tricks.