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Forex trading is a great way of earning nice money for a living. Well, if you know what you’re doing that is. Just like betting, forex trading can be highly profitable if you learn all the basics and use the right strategies. However, don’t expect forex trading strategies to be like online slots strategies – they are very different and have the goal of bringing you profits, unlike in gambling where the house always wins.
Traders, especially beginners, are often confused about what forex strategy they should use when trading. There is money to be made – you just need to learn what strategy works best. It might take you some time to understand it all, but once you learn what Forex trading strategy you need to use in a certain situation, things will become easier.
Position Trading
Position trading is done on a pretty strict timeframe (daily or weekly) – it’s not a long-term approach where you observe and hold shares for months. This approach allows you to analyze the fundamentals for support before you make your move. If your analysis is good, you can actually start a new trend and of course, make big money.
Position trading does come with a few negative sides, however – it requires a lot of experience and a firm understanding of the fundamentals of the market. Another negative thing about this approach is that due to the low number of trades, you might not make a lot of profit every year. If your analysis is sound, though, there’s a pretty favourable risk-to-reward on your trades.
Swing Trading
Unlike position trading, swing trading is a medium-term approach with which you trade in a 1-4-hour timeframe. Your goal is to catch a ‘single move’ on the market, or swing, a term this approach takes its name from. For swing trading to work, you’ll need to know a lot about moving averages, support and resistance, and even candlestick patterns.
Swing trading allows you to retain your current job and can make you profitable year after year. However, it’s an overnight risk that doesn’t allow you to take action in big trends.
Day Trading
Day trading is a favourite of many forex traders. It’s a very short-term approach (5-15 minutes timeframe) which is often combined with swing trading. Still, both approaches differ very much and shouldn’t be confused, as day trading closes positions before the market closes, while swing trading allows overnight hold.
Countless internet scams have profited off day trading, presenting it as a sure way of earning money. However, it’s a pretty risky approach and therefore not suitable for starters. It requires a deep understanding of the forex trading market and strategies that will make you profitable in the short term. Plus, it’s highly stressful.
Scalping
Scalping is a short-term forex trading approach in which you watch what the market is doing right now and taking advantage of it. You’ll be holding trades for seconds or minutes and use the order flow as a scalper. Due to this, it’s pretty stressful and will ruin your social life as you’re stuck behind a screen all day long.
Still, scalping can be pretty generous as you’ll get many opportunities per day. There are scalpers who live off this approach, so if you’re willing to try it, it can be very profitable.
