subject: Forex Trading Strategies - Which One You Should Use? [print this page] Every trader that has learnt or tried forex trading for a while will find a bunch of forex trading strategies that can be used. Each of it has its own advantages and disadvantages, ask for different data and condition, and will show its true potential in particular currency pair.
Fundamentally, forex trading strategies can be separated into 2 major:
1. Technical analysis
This strategy is utilizing data as its main information source, especially charts to predict the future market movement. You will find various methods to read this data like candlestick charting or Elliot wave, yet 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 preferred by most traders and they use it in regular basis to decide the very best opportunity available presently. In most cases, each trader has their own way to interpret the data by using various variables that developed specifically for a specific market he is in. These difference in methods make them have different winning rates even though they can access the same data; the trader with a better method will get more 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: several news such as Non Farm Payroll or Wholesale Inventories can affect the market significantly. If you can analyze the market movement before the news out, you can secure your position and wait for the 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 have huge impact in the currency values. Typically, it will be too late to enter the market when the outcome has announced, so you have to make use of the current data to analyze and speculate the result before.
Fundamental analysis use is not limited to short term trading, it can also applied on long term forex trading strategies. This is somewhat complex, but fundamentally you estimate the future trends of the market based on the way the new policy will influence the market in long run.
If you are still unfamiliar with forex and looking for a suitable forex trading strategies then I suggest learning technical analysis first, it is the basic of almost all strategies.
