Forex trading if you have not heard of it before, involved trading of international currencies on the forex market. The forex market is the most liquid of all the markets and because of this reason there can only be two possible outcomes, you make a lot of money, or you lose a lot! Like most forms of trading, there are many strategies you can use to increase your chances of succeeding in trades rather than failing.
Forex Trading Strategy One – Simple Moving Average
When it comes to forex trading, there is nothing more important that having the ability to read past data from charts. One of the things we can learning from this past data is the Simple Moving Average (SMA). The SMA is usually worked out by taking point's from twelve 15 minute periods and this is usually automatically generated with any forex trading platform.
So how can the SMA help us learn when its' time to buy and when to sell. Well the simple algorithm most traders use is when the price of the currency crosses above the SMA, it's immediately a signal to buy. When it drops below the SMA it's a signal to stop and reverse the trade. The price of the currency you will notice consistently crosses the SMA, therefore using this strategy enables us to basically stay in the game. There are two presets that you can follow, which are generally good strategies for staying in the market, which should be your overall goal. The longer you stay in a market, the more potential money you can make.
Forex Trading Strategy Two – Support And Resistance
The second strategy that a lot of high learning traders tend to use is the basis of support and resistance levels. This is basically when the market tends to reach a certain price repeatedly but fails to exceed it on most occasions. It can be derived by investigating past results and determining where such events have occurred a number of times.
Once you have obtained a price that looks to be a good support and resistance level, we can say that when the price hits that level in the future, it is a good signal that the price is probably going to go down. Of course this is not a 100% accurate strategy but in the world of forex trading nothing is. We just have to extract data that looks to follow a particular trend and trade based on that information.