Forex Trading Strategies – Which One You Should Use?
Every trader that has learnt or tried forex trading for a while will find a bunch of forex trading strategies that can be used. Every strategy has different pros and cons, need different circumstance and data, and will works well in certain currency pair.
Fundamentally, forex trading strategies can be divided into two major:
1. Technical analysis
This strategy is utilizing data as its main information source, especially charts to predict the future market movement. You can find various methods to read this data such as candlestick charting or Elliot wave, but fundamentally they look for patterns in the chart for a certain timeframe and searching for relationships among various indicators such as price and volume.
This strategy is favored by most traders and they use it in regular basis to decide the best opportunity on the market presently. Usually, each trader has their unique way to interpret the data by using various variables that developed specifically for a particular market he is in. That’s why even when everybody gets the same accurate data, only the one with the right method can convert it into profits.
2. Fundamental analysis
This strategy is executed by analyzing various economy factors like interest rate, production, payroll, management, and overall state of economy to make entry and exit decisions. For example: some news such as Non Farm Payroll or Wholesale Inventories can affect the market significantly. If you can predict where it will be headed before the news released, you can gain a lot of profit.
On some occasions, there are important meeting holds by certain persons who have high influence in the state of economy. For example, a meeting about deciding the new interest rate or inflation will present huge impact in the currency values. Typically, it will be too late to go in the market when the outcome has released, so you must use the current data to analyze and speculate the result ahead.
Not only short term trading, fundamental analysis can also be used as a long term forex trading strategies. This is somewhat complex, but fundamentally you predict the future trends of the market based on how the new policy will influence the market in long run.
If forex trading is a new thing for you and you are still searching for applicable forex tradings strategies, I recommend learning technical analysis first since it is the foundation of almost all strategies.
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