Forex Trading Strategies

Forex Trading Strategies
Signing up to a Forex broker and making an initial deposit is one thing - but when it comes time to actually start trading on the Forex market, the hard work really begins. As you would expect, there are a number of "schools of thought" when it comes to Forex strategies - however they are broadly similar to those of other markets.
The two umbrella terms given to the overarching strategies available to investors are:
-Technical Analysis
-Fundamental Analysis

Both of these have their own pros and cons, and each of them is best suited to a different type of trader. For example - a technical analyst is often a person who enjoys working with numbers, charts, statistics, etc.

On the opposite side of the scale, a fundamental analyst enjoys reading the news, learning about the economic climate of each country and predicting the future changes in policy of those countries.
Each is fundamentally different. However, despite people usually picking one or the other when it comes to these two schools of thought, there are a few Forextrading factors which are relatively similar regardless of which of the above you choose.

Risk Adverse vs Risk Aggressive
One of the mutual decisions that you need to make, regardless of which FX strategy you are using is how risky you are going to be. People who are less risky are considered to be risk adverse, whilst those who enjoy taking on risk are said to be risk aggressive.
The ultimate decision really comes down to how much capital you are prepared to lose. Those who want to conserve capital and in return receive lower profits should go for risk adverse trades.

The opposite is true for those who do not mind losing but then again want to profit significantly from trades.
Trading Time Frames
You'll soon come to learn that trading can take place on many different time frames, with the following being just a few of them:
- 5 Minutes
- 15 Minutes
- 30 Minutes
- Hourly
- Daily
- Weekly
The most popular time frames are 30 minute, hourly, and daily. However, many people have also had success with the other time frames. This is especially relevant for those of you who want to trade with a technical analysis strategy.
It is a proven fact that on the 15 minute time scale, technical analysis is less effective than it is on the Daily time frame for example.

Hence - you need to keep this in mind when developing your trading strategy.
Lot and Transaction Size
There's a big difference between trading a lot of $10,000 and a lot of $100,000. In fact, 1 pip on a $10,000 lot is $1.00 - whereas 1 pip on a $100,000 lot is $10. Whilst the profit therefore on a larger lot will be greater,

so will any losses that you make.
For example, a 20 pip loss on a mini account lot ($10,000) will reduce your account capital by $20.00. However, on a standard lot ($100,000) - it will reduce your capital by a huge $200.00.
Therefore - incorporating the correct and appropriate lot size in to your trading is extremely important.
Charting Tools
Charts are the common way of seeing where price has been, and what a particular currency pair has been bought or sold for in the recent past.

Most brokers offer free charting software - however there is a large variation in the features and flexibility of the charts.
Technical analysts will want charts with comprehensive indicators - whereas fundamental traders will not need this.

Additionally, technical traders might want the ability to trade directly off the chart, whereas again fundamental traders probably do not need this capability.
This is something to think about before signing up to a particular Forex broker.