Whether you’re a forex trading beginner or seasoned trader, how to best optimize forex earnings remains the most discussed topic.
Though there are as many strategies as there are day traders, in this article we’ll provide you with some of the best trading strategies and methods we’ve found, to help you become profitable in the forex market through trading online. The first thing you have to decide is whether you are looking to optimize your forex earnings in the long or short term, as the best strategy for you will depend on these goals. These specific aims will also influence how to best benefit from your position through trading capital (your money) and leverage (what you borrow). For this reason, different traders utilize unique strategies; for example, the position trader looks out for the long term, while a day trader could prefer either a long or short-term investment strategy. Whatever your strategy, it’s necessary to conduct the proper market analysis on important currency pairs, such as GBP/CHF, AUD/NZD, and USD/JPY, to determine potentially profitable currency pairs to exchange, based on examining a trend. Following various trading strategies, you can either become profitable or if things aren’t going well, you might need to consider another strategy that will work better for you. Once you have optimized your earnings, and are in a profitable position, you can close a winning trade. Sounds great, right? Let’s get started.
How to Profit from the Forex Market
First up, when determining how to profit from the forex market, you first need to have a solid money management strategy—i.e. how much, and using what strategy do you intend to invest your money? Yes, the goal, in any case, is to make a successful trade (you gain more money than you lose), but what is the larger goal you are working to achieve? This plays a key role in the methods you select when it comes to trading forex. In any case, it’s important to pay attention to the economic calendar (dates in which specific economic information is released), as important information is disclosed regarding how the economy is doing in terms of production, prices, interest rates, etc… This can drive currency values—i.e. when news gets released that a certain economy is experiencing high inflation, its value could lower. If you’re worried that your forex could plummet in value after hearing certain economic news, you could utilize a stop-loss order—and sell your forex at a cheaper price (which creates a loss), but allows you to regain cash and stop yourself from losing more. Trend analysis can help you determine opportunities to make a winning trade. More specifically, pivot trading involves using pivot points to identify price trends and therefore opportunities to make a profit. When considering your personal trading strategy, pay close attention to daily pivot points, which are used in trend line analysis to highlight the relationship between the intra-day high and intra-day low closing prices. The Pivots level determines support and resistance levels, which indicates the best time to buy and sell forex.
What strategy is the best for forex trading?
So, what is the best strategy for forex trading? That depends on your short and long-term goals. We’ll explain some of the different forex trading strategies below, to see which strategy is the best fit for you:
Interest rate forex trading: This method utilizes perhaps one of the most important factors in determining the true value of forex: the currency’s interest rate. By keeping an eye on even minor fluctuations in nations’ interest rates, you have the opportunity to create a profitable exit trade.
Price action trading: This is the preferred strategy for short-term traders. It uses the plotted values of forex over time, and the up and down trends which result, to determine trading opportunities. By examining the direction of the trend and determining entry or exit points (set indications of when to buy or sell), traders can determine how to make a successful trade.
Scalping strategy: This is one of the methods used in day trading. By conducting fundamental analysis (using macro and microeconomic values to determine the intrinsic value), investors seek to profit from small changes in the market by tracking even the smallest price movements through pips (percentage in points). These traders tend to hold onto the forex for a short amount of time, and generally only make a small profit.
Regardless of the strategy you choose, the FlowBank app allows you to do all of your trading with ease.
Trend identification
So, what is the best way to identify trends? As mentioned, it’s important to pay attention to the economic calendar, and how trading in the news is covered; this can provide you valuable insight regarding your online trading. You can also read a market research blog, as well as keep a close eye on financial news, which should provide you with some key forex market analysis and trading ideas. Always remember that the key to a winning trade is proper trend identification. Various types of trading indicators can provide key information regarding historical performance, and therefore be used to predict future prices. Oscillators are just as important, as they can help traders determine whether currencies are being overbought or oversold in certain markets. Next to this, Fibonacci retracement levels can be used to determine possible support and resistance levels indicating upcoming price changes. If we go one step further, Japanese candlesticks can be used to analyze traders’ reactions to various markets. These reactions create patterns in charts, which can help indicate reversals (positive or negative changes in a price trend). With so many types of trading strategies and various methods to identify trends, it’s important to develop a solid money management strategy to ensure you are consistently making decisions that best benefit your short and long-term forex trading goals.
We hope you enjoyed this article and found it helpful. If you would like to learn more information on forex, please take a look at our guide, Forex Trading Explained:
