After learning trading basics and stockmarket rules or technical background of working on forex market any beginning trader starts to explore and then work out his own trading strategies of the forex market that he is going to use while realizing a dream of financial independence.
Naturally, profitable trading strategies on forex market include a set of instruments and rules, according to which deals are made. One may single out the following forex strategies, according to set of rules, instruments of analysis and decision making:
Fundamental forex strategies involving only instruments of fundamental market analysis. The decisions are made only according to analysis of macroeconomic and political events or market participants’ expectations. Given strategies do not determine exact entry and exit points, also they imply possibility of considerable floating deposit slump and a comparatively low profitability.
A significant drawback of fundamental strategies is ambiguity of various events because of different methods of approaching to fundamental analysis. A trader using fundamental analysis must possess self-control and composure when analyzing and making decisions. Not all of the experienced traders can demonstrate those qualities, not to mention the beginners. That is why given strategies are mainly used by institutional investors that do not have such capital mobility, as a private trader.
Fundamental forex strategies can’t be used in short-term trade, since a minimal period of hedging is from a month to several years. These strategies are not available to a beginning trader who does not have a proper economical training. Also the restrictions of using such strategies are influenced by existence of irregularity of information for the average man and a large investor.
That is why mechanical trading strategies of forex that consist of strict series of rules of entry and exit from deals are so popular among private traders. Their main advantage over fundamental strategies is the possibility of full formalization of the process of decision making and a risk reduction of losses because of the human factor.
Usually the basic forex strategies include forex indicators or methods of classical technical (graphic) analysis. Currently there are many market indicators, but there is also a possibility to develop your own indicators.
A mechanical trading strategy creation consists of development of trading rules and testing of effectiveness of the given strategy. A possibility of modeling (including automatic one) of a strategy conduct at different times enables one to develop profitable forex strategies without expenses. Nevertheless a beginning trader faces difficulties when developing his own strategy. That is why it is recommended to try existing mechanical forex strategies that are available to everybody, with small amounts of money. After understanding the conduct of given strategies in different situations of the market, a trader will be able to select and to test the instruments that were more comfortable and understandable.
If a mechanical trading forex strategy can be fully formalized, it becomes an automatic trading strategy. This trading strategy may be presented as a trading robot that would make decisions independently, in accordance with defined algorithm. The advantage of automatic forex strategies is that the computer processes data faster than a human being and can instantly give trading orders for execution, which will permit to get more profitable prices of transactions. Also automatic trading strategy permits the trader not to watch closely the market but to concentrate on self-improvement instead. Of course it is not a fully autonomous work, since the trader must periodically look through deal results and to make necessary adjustments in robot’s work. According to statistics more than 50% of all stock-exchange deals are conducted with the help of trading robots.
Mixed forex strategies include elements of mechanical and fundamental forex strategies. These strategies allow one to be able to analyze a micromarket and they also give accurate entries on indicators. Thus the mixed strategies are the most flexible ones, but in order to use them one must possess fundamental analysis skills and to perform strictly the signals of mechanical system, which is possible only for experienced traders with good fundamental training and high level of self-control.
All trading strategies are based on a given regularity, but from time to time some regularities disappear for an indefinite term. That is why a trader even if he has a profitable forex strategy must constantly analyze its effectiveness and make changes in existing algorithms of decision making. Source: DewinforexSocial button for Joomla