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Methods of Forex Trading


Forex trading is one of those things that can seem really subjective. Everyone has their own preferences on how to get the job done. I don't think I can say for sure that there is an absolutely right way, but there is many wrong ways.

As a trader, your method has to be something that makes sense on paper, and when you are trading live. If you want to make money trading forex, there is more than one way to skin a cat.

This is one of my least favorite methods. Scalping is when you are basically just trying to scrape a few points here and there. It can seem easy if you manage to be successful at it for awhile, but it tends to be a method of luck, meaning you can lose just as easily as you can win. There isn't much rhyme or reason to it.

The Forex Daytrading Method
Along with scalping, daytrading is one my personal least favorites. There are people that do like to be tied to a screen all day and make money while trying to make intraday trades. Day trading is typically technical trading that is based on technical indicators and occasionally some news. It requires some reasonable amount of skill, that usually has to be learned with experience. If you are just beginning to trade forex, day trading probably isn't for you unless you start very small with your lot sizes.

Big Picture Forex Trading
Big picture trading is looking at the larger charting timeframes. Looking at currency pairs over days or weeks and trading the trend of those timeframes. This is one of my favorite methods because you aren't left hinging on every pip up or down. You work over many days, or months and set big targets and wide stops. You still need to trade small as a beginner, particularly because on these charts moves can be thousands of pips, so you need to plan accordingly. However, the movement is so slow that it lessens the emotion if you are trading with care.

Automated Forex Trading
There are several different ways to do automated forex trading. You can depend on signals given by a signal provider or simply run an expert advisor on an install of metatrader that trades based on preprogrammed signals. I don't personally care much for automated trading as it's pretty difficult to find a good system that survives in most market environments. I consider automated trading something that is good as an alternative strategy that you run alongside your real trading strategy. If you plan on engaging with automated forex trading, make sure to keep it a small part of your trading plan. Don't wager large amounts on software with a slick sales page. Unless you've seen results for yourself, nothing is guaranteed.

No matter how you plan to trade, you need to keep your emotions in check, watch your risk, and be honest with yourself when you are having trouble. Even professional traders don't like to admit when they are having a losing streak, or what is causing it, but it only hurts your bottom line when you don't face problems. That's a bit of a general business principle, but it strongly applies to trading.

Forex trading will eat you up and spit you out if you don't handle yourself and your trades properly.

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