Why You Should Not Use Buy-and-Hold Strategies in Forex Trading

Some Forex traders, particularly those who are just starting out and don’t want to close their trades, use buy-and-hold strategies. However, although these types of strategies can work outside the Forex market, they don’t really work inside it. A buy-and-hold strategy is used to hold onto losing trades, in the hope of them coming up in value eventually in the long run. This is logical; if a trade is losing, you hold onto it until it becomes profitable. However, if the currency market really worked like this, everyone would be rich because no one would ever lose. Buy-and-hold strategies are used a lot in real estate. The economies of developed countries usually go through boom-and-bust cycles, where the prices of assets can rise and fall cyclically. Those who invest in real estate usually see through bad economic times and wait them out until the economy resumes to normal, where they can then sell the assets or at least just feel happier about them, knowing that they are once again worth something significant – but currencies don’t work like this. The prices of currencies tend to trend strongly in particular directions; their values typically trend in one direction in the long run. This is exactly why buy-and-hold strategies don’t work particularly well in the market for currencies. By holding onto a losing trade, your losses will simply build up and up. If you’d applied leverage to a losing trade, you would eventually meet your Forex broker’s maintenance margin and end up having to cut your losses the hard way. This can lead Forex traders to go completely out of business....

Choosing a Suitable Forex Trading Strategy

There are many different types of Forex trading strategies, which means that you have a lot of choice when it comes to choosing one. Since there is a lot of choice, there is no reason why you should choose a trading strategy that is not suitable for you as an individual Forex trader, but some traders still do choose strategies for trading that aren’t suitable for them. If you can choose a Forex trading strategy to use that is suitable for you and your own situation, then you will be able to maximize your chances of success in the Forex market. By choosing a strategy that isn’t appropriate for you, you won’t benefit at all and will most likely deduce losses that are simply unnecessary. Strategies for trading are important so you should take care when choosing one; remember, your trading strategy can of course change in the future so you don’t have to worry about the future – you need to think more about your current situation. Most currency traders start out working full-time jobs, so if you currently work full-time and are only looking to get into Forex trading part-time, you should choose to use a strategy that doesn’t require much time consumption; long-term trading strategies are better in these kinds of situations. Similarly, you might go for a longer-term strategy for trading if you simply want to keep your money invested and don’t want to spend a lot of time trading currencies. When choosing your strategy, you will need to think about your goals too. By choosing an appropriate currency trading strategy, you will stand a...

Making Profits with Forex Gap Trading Strategies

Forex gap trading strategies quite obviously involve Forex market gaps, which can be seen after the weekends, when the markets open once again, because the market is open 24 hours a day on the other days of the week. They occur when the opening prices of the markets are different to the closing prices. These gaps present opportunities to Forex traders that can be very profitable. The interbank currency market reacts to fundamentals and news releases over the weekends. This is why although the markets close for the small-time, individual Forex traders, the larger banks and corporations can affect the prices of currency pairs over the weekend, causing individual traders to see opening prices that differ from the market’s closing prices. There are two types of Forex market gaps. Of course you can profit through trading either of the two types gaps. The two types of gaps that can be seen in the Forex market are: bullish gaps and bearish gaps. Bullish gaps are gaps where the market’s opening prices are greater than the market’s closing prices. Bearish gaps are gaps where the market’s closing prices are greater than the market’s opening prices. In order to profit from either a bullish or bearish gap, you should wait after the weekend for the market’s opening prices. If the opening prices are greater than the market’s closing prices, you have a bullish market gap on your hands. However, you shouldn’t place an order straight away. You should wait until you spot a bearish reversal pattern after the bullish gap, because it is at this point that you will want to consider...

Pyramiding in Forex Trading

Pyramiding in Forex trading, is all about adding to a profitable trade in order to make even more profits. It can allow Forex traders to deduce very large profits if performed correctly, as good trades continue to grow. Pyramiding is generally used in long-term investments, but it can also be used in shorter-term trades too. In Forex trading, pyramiding trading strategies merely consist of adding to growing, profitable trades in order to maximize their returns and these types of strategies don’t even have to be risky either. What is risky about pyramiding, is that in the case of longer positions, a pyramiding Forex trader will have to pay a higher price when their trade in question is going strong, which can damage their profits made on their original position if their trade begins to reverse. However with pyramiding, if the trade in question continues to profit, the currency trader can make a much more significant amount of money. If a trade is going strong in one particular direction and especially if the trade in question is long-term, then pyramiding can be pretty risk-free and a great way of maximizing profits. As long as you only increase the sizes of your positions on trades that are clearly doing well, you should be fine. Of course there is always a chance that your trade will reverse and fall in value which could be quite damaging, but the risk is fairly minimal when it comes to longer-term trades as currency pairs tend to move strongly in only one direction in the long run. It is also possible to use your previously made...

Mastering One Currency Pair at a Time in Forex Trading

Choosing currency pairs to trade in Forex trading is important. In order to maximize your chances of success in the Forex market, you need to choose one or a small number of pairs of currencies to trade and then after doing this, you should stick to them. This way, you will be able to master them and maximize your profits in the currency market. Every currency moves in a slightly different way and different currencies tend to have different habits and such. This is why you need to focus on just a few, so that you can master them and make more money. There’s no point in moving from one currency pair to another, because by doing this you will never be able to get a chance to really master one pair in particular. By focusing on particular currency pair, you will be able to master that particular one over time; you will begin to become more familiar with its trends, patterns and habits that separates it from other pairs. Once you master a particular currency pair, you will really be able to start making some real money and your trading of currencies will become more effortless. It’s best to focus on major currency pairs as they are generally easier to trade successfully. They are less volatile than exotic ones for example, which makes it easier to make profits with them. Major pairs of currencies are also easier to analyse. For example with a major currency pair like USD/GBP, you would be able to look at the nonfarm payroll in the US and stay up-to-date with both economic and...

Forex Price Action Trading Explained

Forex price action trading strategies are strategies that merely focus on trading price action. Price action is simply a term used to describe the movements of currency pair prices, in Forex trading. Most Forex trading strategies focus on more complicated elements, but this type of trading is actually very simple and it is easy to pick up too. Most other strategies that are also based on technical analysis, will involve the use of at least one or more technical indicators. There are many technical indicators, including: RSI, CCI and MACD. Not only can it be hard to choose one or more technical indicators to use, but it can also prove to be difficult to actually use them effectively, especially for beginners. Price action trading doesn’t involve the use of complicated technical indicators; it only involves price movements of currency pairs, as mentioned already. It involves nothing more than basing investment decisions solely on price movements of currency pairs alone – nothing else. The main advantage of trading price action, is its simplicity; your price charts and graphs aren’t stuffed with various technical indicators as such when trading the action of currency pair prices only. This makes the whole process of trading currencies far easier, which is why Forex price action trading strategies are popular among some beginners. It is all about trading only on the prices that are printed right in front of you, rather than past prices or lagging ones, that most indicators are derived from. If you want to be successful at trading price action, you need to study price charts and graphs a lot. This type...