What Is the Forex Market?
The Forex market is the largest market in the world, with thousands upon thousands of people who trade currency pairs daily all around the globe. The Forex market is open 24 hours a day, five days a week, which makes it easy to enter and exit trades regardless of the time zone you’re in, and the market is built around making short-term investments that can be quickly turned around for a small profit (which can dramatically add up over time). It’s easy to take your first steps to learn to trade, and even complete beginners can soon start making a profit with the Forex market.
At Guerrilla Trading, we know how intimidating it can be to begin learning to trade, and we’re devoted to helping you learn the process and avoid taking too many wild risks with your money. The Forex market can be challenging to predict, and even long-time traders can still make mistakes that were avoidable in hindsight. With so much information out there, there is certainly no reason why you should jump straight into Forex trading without learning a little more about the market and its ups and downs first!
If you are looking to learn Forex trading, you may be wondering which strategies you should spend your time reading about to maximize profits in a short amount of time. Fortunately, we have collected some information about various systems, all in this one article. Take your time to research them and decide which ones will work best for you. There are so many strategies out there, and not all of them may fit your personality type and preferred way to trade. Once you determine your preferred trading strategy, you will be much more prepared to learn to trade in the Forex market.
Learn to Trade in the Forex Market
Above all, profiting on the Forex market requires you to trade regularly; the market changes quickly, and if you don’t keep up with it, you could miss the opportunity to score a great deal and turn a profit. Although you can feel certain that there will be other opportunities to profit in the future, it is always better to trade as much as possible. Let’s say that after paying your bills this month and moving money into your savings account, you can only afford to set aside a small amount of money to trade on the Forex market with. If you trade regularly, you can make enough profit to buy even more currency pairs to trade with; an opportunity that you will miss if you aren’t regularly watching the market.
It is also important to note that unlike the experience of buying stocks in a company, Forex trading is not about long-term investments. When you trade on the Forex market, you are trading currency pairs, which are two currencies from different nations (hence the term foreign exchange market). The value of these currencies fluctuates slightly every day: for example, if you were to trade 1000 euros in while on a visit to the United States, they might translate to 1300 U.S. dollars one day but might translate to 1100 the next. Either way, you will be making a profit on this trade. Any time you trade currencies while you travel internationally, you are engaging in the foreign exchange market. A Forex trader is someone who watches this market and trades currency pairs back and forth whenever they are able to make a profit.
It’s also possible, however, that if you were to trade 1000 U.S. dollars in for euros, they could be worth less. Perhaps you would only be able to trade them for 900 euros, and if their value continues dropping, you might be able to trade them back for only 700 U.S. dollars. A $300 loss is certainly a dramatic (and bitter!) thing to discover if you took that money on your international trip and didn’t spend a cent! If you aren’t careful, it is easy to lose money on the Forex market. That’s why it’s so important to be aware of changes in the economies of multiple countries and keep up to date with multiple Forex strategies. Learning to trade in the Forex market requires constant research, and Guerrilla Trading is here to help get you started.
Forex Market Strategies
It can take a long time to see success from Forex trading, and finding the right trading strategy is mostly a matter of personal preference; for example, not everyone enjoys fast-paced, high stakes trading, but others much prefer this style of trading because it helps them see a profit every day instead of every few days. Now that the basics are out of the way, here are some great Forex trading strategies that we recommend you experiment with throughout the year:
Full Price Action
If you use a full price action strategy while watching the Forex market, that means you are making decisions to trade that are entirely based on the numbers you see before you. For example, when you see an opportunity to make a 26 pip profit, you choose to take that offer rather than running any formulas or analyses that might help you determine the likelihood of that profit increasing further over the next few days. You are making decisions according to your personal understanding of the market.
Scalping the Forex market is a strategy that requires immense patience and concentration. If you plan to scalp trades, it means you will be sitting in front of your computer for hours at a time, studying the numbers and waiting to pounce on good trades. When you scalp trades, you are essentially skimming off a tiny amount of profit by trading currencies rapidly back and forth. The Forex market is already built around this concept of short-term trades, but scalping trades implies you are doing that even faster than usual (sometimes every other minute). Instead of holding onto a trade for several days while you wait for a significant increase, the scalping strategy encourages you to trade currency pairs back and forth several times a day, even when the profit margin seems minuscule. You need to be observant and decisive while you scalp trades. Often, you’ll be making only a 5 to 10 pip profit on each trade you make.
If you are interested in using high leverage to increase your profits, scalping is generally a safe time to do so, as the trades you are making are very small. Like any profit, however, you will be able to grow it with time and patience.
News trading is a complicated strategy that is not often recommended for Forex beginners who are still learning to trade. News trading requires a great deal of technical analysis and research, more than most of the Forex trading strategies. An example of news that you might monitor when preparing to trade currency pairs is news about a country’s changing unemployment rates. If you plan on news trading, then you should know about:
- Directional Bias – You expect the market to move in a specific direction after news is announced. This impacts your decisions to buy and sell: for example, it is possible to encounter a time when it is a bad idea financially to buy a currency even when the price of it is low. If the value of that currency continues diving lower, you may be stuck with a currency that you will make a loss on instead of a profit. Keeping a sharp eye on the news helps you be aware of when it’s a good time to buy low, and when “low” will not continue plummeting into “lower.”
- Non-Directional Bias – A more common news-based trading strategy. Here, the idea is that you have a plan already in place that will allow you to act wisely regardless of what kind of news gets released to the public. You are prepared to trade in some way, whether it means buying or selling. For example, you are not putting all your eggs in the basket of buying the U.S. dollar when you wake up tomorrow. Instead, you are prepared to watch for news all around the world that can affect trades. You are ready to buy or sell the U.S. dollar, the euro, Japanese yen, the British pound, and more. No matter what happens, you’re prepared to be there and start trading fast and furiously when it does.
Although the Forex market generally encourages short-term trades, there are a few longer-term strategies that you may be interested in trying out, especially if you don’t enjoy watching the Forex market every day. The strategy is fairly simple: you buy a currency pair while the price is low and you hold it while the value is high. This is the same idea behind Forex trading in general, but trend traders hold their currency pairs for longer times and wait for a strong trend to develop before they sell them.
A trend trader is someone who will watch for strong declines on the market and choose carefully when to buy a currency, as they are prepared to wait until the currency stops dropping to feel confident that the value won’t reach any lower than it is. Trend traders may wait as little as ten days or as long as several months before they make trades, and they spend this time gathering useful data about market trends. In contrast, many traders on the Forex market prefer to make shorter-term trades by buying and selling within a few days, taking the best offer they see during that time rather than holding out for longer in the hopes of a better profit.
Swing trading, also known as momentum indicator trading, is a Forex trading strategy, falls between being a short-term and a long-term trading strategy. Swing traders sometimes trade alongside major trends and sometimes trade against them, which can allow them to be more prepared than most if a market shifts unexpectedly. This strategy is not for everyone since it can involve considerable investment, but swing traders can benefit by staying ahead of resistance levels that begin forming when a currency pair’s value has significantly dropped.
Fibonacci Forex Strategy
If you enjoy studying charts and data, then the Fibonacci Forex strategy is another strategy you may be interested in. Fibonacci indicators are lines that are drawn on a price chart indicating areas of support and resistance, meaning that these areas are when traders like you should place their entry and exit orders before the market begins to shift (For example, the Fibonacci indicator can help you determine where the expected high point of value is and where the expected low point of value is, so you can feel confident selling your currency pairs when the value reaches that point, as it is not assumed that the value will rise any higher, and if you wait much longer, the value may start dropping).
The data that is used in these indicators comes from observing the market over time. This strategy is not foolproof since you cannot expect the Forex market to repeat the same trends forever, but the data is generally consistent enough that you can recognize what is the average expected value of the currency pairs you trade regularly.
At Guerrilla Trading, we are looking to help you profit on the Forex market, not to mention expose you to strategies that will help you learn to trade safely without risking too much money. If you are looking for even more information, consider signing up for a Forex trading course, using our profit calculator tool, or read our FAQ. Looking to contact us for questions and comments? You can also choose to email us at [email protected] or fill out our online form and we will get back to you as soon as possible. We are always happy to hear from new traders who are looking to take their first steps towards learning Forex trading and are excited to welcome you into the Guerrilla Trading community.
HAVE ANY QUESTIONS?
Do you want to learn more about Forex? Or would you like to understand how Forex experts achieve their trading goals? Speak with our team now and we will be more than happy to help.