The two broad trading techniques in the forex market are the fundamental analysis and the technical analysis. The technique that is suitable for a trader depends on his or her trading style. There are four key forex trading styles you need to be aware of. These are:
- Day trading
- Swing trading
- Position trading
Scalping is the speediest forex trading style. It occasional involve a trader buying and holding trade for a seconds. Forex scalpers typically open dozens of trades within a single day. They frequently concentrate making profit out of very minimal price movements or fluctuation in currency rates. They frequently close trades with just minimal pips of gain. This trading style may not be the ideal for every trader. With regards to the trading strategies, forex scalpers mostly make use of short-term technical analysis and news trading. They use these as the basis for placing trade with the aim of making fast and short term trading in anticipation of profit.
Day traders make trades within short timeframes and hold their trades within a day and close their open positions at the end of the trading day. As a standard, if you open not less than least four trades every week and hold them merely during the day, you’ll be among the group of traders referred to as day traders. Similar to scalpers, day traders base their trading on the technical analysis of comparatively short timeframes, which can last from roughly 15 minutes to an hour.
Swing traders trade longer timeframes and hold their trades for some days of or weeks. As opposed to day traders, swing traders faces additional risk if the market condition alters at night or over the weekend. Nevertheless, the longer timeframe helps swing traders to make bigger gain than day traders if the market moves in their favor. The best forex trading strategies for swing traders is a combination of the technical analysis with fundamental analysis.
Position traders are traders who leave their trade positions open for a very long time. Their open positions can last for months. To do this they require a well grounded analysis of the basics of the forex market give the fact that fundamental analysis have a great effect on long-term forex actions.
To be successful as a forex trader, you need to take into account these variations in these trading styles to be able to select a suitable trading strategy that’ll serve your needs.
Technical and fundamental Forex trading techniques: which is better?
One of the most fascinating questions about forex trading is whether to based the trading strategy on technical analysis or fundamental analysis. While there is a debate among forex traders consigning the best one among them, there is no one answers to the questions.
Technical Forex market strategies depend on the analysis of price charts and historic price data and makes use of three fundamental codes of belief of technical analysis. These are that (1) price marks down all market data, (2) markets is mostly trending, and (3) history repeats itself.
The great feature of the technical analysis is that they work fin on any time frame ranging from 5 minutes to up to one month. Technical analysis has also been found to produce consistent returns in so far as the trader makes the analysis properly. Contrary to the fundamental analysis, technical analysis as well offers the user a entry and exit positions which is highly significant for this type of analysis.
Fundamental Forex analyses on the contrary, focus on the analysis of the underlying fundamentals of a currency. Examples of these are alterations in the fiscal policies, economic growth, rate of unemployment, inflation and interest rates, relative output and purchasing power equivalence between different countries. Fundamental analysis is commonly more complex than the technical analysis, because to succeed with it, the trader ought to make proper analysis of the different news sources and sort out which one among them is more significant.
Fundamentals work best for long-term traders, and ought to as well be analyzed by swing traders who trade short term. Also, day traders know that forex fundamental analysis is very essential when just a significant news release causes hundreds pip rise in just few hours. Nevertheless, given the fact that fundamental analysis don’t come with precise entry and exit points, we’ll concentrate on technical trading strategies and presume that the price action analysis discounts all fundamental analysis. In reality, one of the most winning Forex trading strategies is purely based on technical analysis.