There’s something about investing that sounds really nice: after buying some stocks, all you have to do is kick back and watch the money grow. However, it’s not as easy or as simple as it sounds. You need to know what strategies to utilize and how to become successful in the field. If you’re looking to trade in forex – that is, the foreign exchange – here are the seven best strategies to trade in forex. Please note that this requires you know a little bit about investing and trading, as it will be difficult to understand the jargon otherwise.
- Plan the way you will trade. There are two categories that you can put your strategies in: hedging and speculating. Hedging is what foreign companies do to protect their profits from losing money due to fluctuating currencies. They trade currency pairs so the money does not fluctuate too much. Currency pairs are the quotation and pricing structures of currencies in the forex market. Hedging can help investors gain access to a more “pure” form of price without losing money. Speculating, on the other hand, involves buying or selling financial assets that are usually at a higher-than-ordinary risk so they make more money. Speculators try to predict the value of a currency in the future so they can buy and sell accordingly. If one category appeals to you more than the other, do research about which one will help you plan your strategy. Planning your strategies will yield a great forex bonus.
- Do your research. After all, you wouldn’t buy the first car that looks good, would you? Same goes for investing. First off, are you looking to have someone invest in a small start-up of yours, or are you looking into investing in certain things yourself? Researching the topic will help you understand better what you’re getting yourself into, and once you have a handle on the best industries and which risks to take, you won’t be diving in blindly.
- Analyze the markets. As you study the markets, analyze the trends and weigh decisions on that. Look at which hours of the day are best for trading. Be willing to learn through trial and error – mix and match different methods. Be patient – the market will not improve instantly. However, if you study the markets and make informed decisions, you will see payoff.
- Keep track of your successes and failures. In essence, keep a diary. Keep track of what has worked and what hasn’t. It’s easy to make the same mistake again if you can’t remember it. Write down careful, meticulous notes on your doings: when you did them, why you did them, your thought process behind them, what your profit and loss is, etc. As you do this, you’ll recognize patterns that will work and help you improve your strategy.
- Manage your risks. This is crucial as it helps prevent you from losing any extra money. Learn how to limit orders and stop/loss orders. This makes you more disciplined and prevents your emotions from taking over and making any risky decisions.
- Use price–action trading. Analyze charts of currency pairs. Look at the uptrends and down trends, and then, according to what the chart is telling you, choose a chart time frame that fits best with your own schedule. This is great if you are a busy person who still wants to invest.
- Implement multiple strategies. If you’re low on time, you can install an app on your phone that notifies you of any changes or trends. Give yourself a specific time to actively participate, and do it only then. You may only be able to do this once a week, but once is far better than nothing at all.
Overall, forex trading is doable. It may be tough, it may be scary, but it is not impossible. As long as you keep an active diary of your successes and failures, do your research (and continue to research more strategies), you will find the best ways to improve your game.