It’s not necessary for every trader to come into the market and have to figure out their own Forex strategies. Having to stumble through the system to figure things out on your own is what costs a lot of new traders their investments. Thankfully, that doesn’t have to be where you start.
There are a number of Forex strategies that are available to anyone investing in the Forex market, and every trader should evaluate each one to settle on the one that suits them the best. While there are many, this article will focus on three commonly used Forex strategies in play today that can help you make profits.
This is a tech indicator used by a number of traders mainly due to the accuracy of the findings. This technical momentum indicator will actually compare the closing price to the price range of a currency over a select time span. This Forex strategy is helpful in determining potential entrance and exit points for a trader based on the holdings and can be utilized parallel to the non-static average.
The generalized theory here is that within a market that has upward trends, the prices often seal out near their high and of course in a down trending market the prices will often seal out near the low. Data wise this strategy is great for a Forex trader to learn the up and down nature of trading and should be part of any traders bag of tricks.
Elliot Wave Theory
This Forex strategy was named after Ralph Nelson Elliot whereby he suggested that the Forex market moves and reacts to the economy and itself in a series of waves. His belief through study is that the market will move up in a series of 5 consecutive upward trending waves followed by three downward trending waves. He theorized that the movements of the Forex market and other stock markets could be predicted by observing the repetitive patterns by which people drive it.
The waves are based entirely on rhythms within the natural world and there is really no timed cycle. It’s based more on the psychology of the masses and is accurate when you consider that the market is driving by people and people tend to fall into rotational habits with their spending and investment. This Forex strategy merely takes advantage of an understanding of the psychology of investing.
This Forex strategy is yet another technical analysis indication tool used by the average Forex trader and provides information to the investor about the prices at any particular point in time between a number of intervals.
There are three defined types of moving averages:
• SMA (Simple Moving Average)
• EMA (Exponential Moving Average)
• WMA (Weighted Moving Average)
On top of those three, Forex strategies that involve moving averages also look at the MACD or the Moving Average Convergence Divergence. This uses a trigger line that plots the difference between various moving averages.
While there is far more detail available on these Forex strategies, and its good to research them because they tend to get quite complex, this at least gives a trader the simple understanding that there are various strategies out there than can be utilized when you began trading in the Forex market. Take the time to study the many available options and stick with that study until the various Forex strategies make sense and you can find one that suits you.