Forex Trading Strategy – Make Money With Currency Trading

Forex trading has become one of the most profitable arenas for both experienced and beginner investors to enter for a long time. The main attractions of entering the forex market is that it is 24 hour trading, you don’t need a huge amount of liquid cash to enter the market and no one cash rich investor can really effect the market at all. The following questions are the dominant ones that most people want answered:

Why do you need a forex trading strategy?

What is the best forex trading strategy?

How do you make money with currency trading?

If you want to become a successful forex trader you really do need a trading strategy. Without one there is every possibility that you will not be informed enough to make the right decisions at the right time. The result can be considerable loss.

What is the best forex trading strategy? Although like in any system there are several variations, with forex there are two main strategies that most investors use plus a third which is a combination of the first two.The two forex trading strategies are Technical Analysis and Fundamental Analysis.

Technical Analysis is mostly favoured by the small and medium sized investors. It is basically an assumption that all the relevant information about a currency has already been analysed and documented and found in the price chain. What this means is that all the factors that influence the price are factored into the price of the currency. A trader using this method will look at the highest and lowest prices that a currency goes to, the opening and closing prices and the volume of transactions that have taken place. An investor using technical analysis will not normally look at the longer term trends of the currency but look at the most recent past, accepting that small fluctuations will go on as before.

Fundamental Analysis relies on a lot of research on the underlying strength of a country’s economy, it’s government, rumours. Also factors like the unemployment level, Central Bank interest rates and the tax policy of the country. Of course there are several others tthat would be country specific. One important point to note is that even though these factors are considered the most important it would be wise to recognise that a currency’s value is also based on the perceptions and expectations of the stock market.

How do you make money with currency trading? In the most simplest terms it is simply trading a currency when you stand to gain immediately from the currency price or on the premise that the currency price will change in your favour at which point you will sell it. No rocket science in that! But the systems in place to determine that optimum buy and sell points are extremely sophisticated taking into account many variables. By using these systems traders are able to make several trades within even minutes, each time creaming off the profit from the trade. A very popular means of making money from currency trading is to employ ‘Marginal Trading’. This term simply means that you are trading with borrowed capital. In this you usually only need 0.5% of the total amount you are trading. Say for example you had $1000 capital, then you could make trades of $200,000. As you can imagine even a margin of only a few points can result in a great profit. Plus the turn around can be extremely fast.

Perhaps this gives you an overview of why you need a forex trading strategy and the basic concepts of how to make money with forex.

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