One of the secrets to finding success in foreign currency trading is using a trading strategy that works very well with you and sticking to that strategy. Searching for that strategy can be difficult at first but once you stumble upon one that is consistently making you profit, it’s best that you stick with it. The profits may not be that huge but if it’s consistent, the profits will all add up in the long run. There is no such thing as a perfect trading strategy. If there is then every currency trader out there should be rich by now but such is not the case. Furthermore, the forex industry is always moving and changing. So strategies change as well.
To help you decide on which trading strategies to use, here is a short list of trading strategies that have worked for a lot of traders. If you use them, you might also find them effective and profitable:
1) Forex Arbitrage. This is a trading method that takes into account the price inefficiencies of multiple currencies then take advantage of such inefficiencies in order to profit. At first glance, this strategy seems very unethical. This however isn’t the case. In fact, the prices of all the currencies are brought into an equilibrium by forex arbitrage traders. You have to be a quick trader for you to be successful with this strategy because you will be competing with other arbitrage traders who often make use of sophisticated computer trading systems.
2) Forex Managed Account. This is a vehicle for those people who wish to become a part of the currency market without actually becoming a day trader. You are thus a forex trading investor. It has glaring similarities to a mutual fund. Basically, what you do is place your money in a managed account that a professional currency trader will run and trade on your behalf. The beauty of this is that your money will benefit from the experience and expertise of the professional trader who will be handling your account.
3) Range Trading. Before you can engage yourself in this strategy, you must be able to find and identify the resistance and support levels of a pair of currency. Once you are able to do this, buy when the level hits support and sell when the level hits resistance.
4) Trend Trading. This is probably one of the most used trading strategies out there. You will be identifying ranges and channels that are either trending down or up. As the price trends up, you want to keep on buying. And in order to ensure your gains, you will then have to use what are referred to as trailing stops.
5) Use any of the above trading strategies with currency options. Yes you can adapt them to work with currency options.
Foreign currency trading may be very complicated and confusing at times but this shouldn’t be the case if you find a trading strategy that works well with you and in which you feel very comfortable trading with.