The exploration about purveyors has helped in identifying their stipulation and interest in behoof while merchandising. One of the methods that tradesmen emphasize on is using FOREX which is a marketplace where traders can swap currencies in order to procure worth. Predominantly, it is considered as a financial asset as it gives its part in liquid market where plethora of emptors and suppliers contribute, reinforcing on yield in return and simultaneously this environment offers diminutive proceedings evaluation. FOREX can be diversified in heterogeneous moulds as the fig. 1 delineates:
|1||Position trading||The trade can be held for a long time||Less time consuming||Need larger capital in relevance to others|
|2||Swing trading||Time frame to work is predicatively 4-5 hours||No need to quit full time||Have overnight risk
|3||Day trading||similar to swing trading but at a “faster” pace||No overnight risk involved as trading ends by end of the day||Stressful as one has to keep a check on markets|
|4||Scalping trade||Very short-term strategy where one hold trades minutes or even seconds.||Multifarious trading opportunities per day||Nerve racking Endeavour|
|Trade on the lower timeframe, consequently, as the market moves in one’s favor, he can elevate target||an insane risk to reward||Only handful of trades may be successful|
Solutions to find answers of implementation of trading for a player: Preponderant questions that a merchandiser may ask himself:
- Do you want to grow your wealth or make an income from trading?
If you make an income from trading, you must find more trading opportunities within a shorter time period (for the law of large number to play out).
This means you must trade the lower timeframes and spend more hours in front of the screen.
The FOREX trading strategies you can use are scalping, day trading, or short-term swing trading.
If you want to grow your wealth from trading, you can afford to have fewer trading opportunities.
This means you can trade the higher timeframes and spend fewer hours in front of the screen.
The trading strategies you can use are swing trading or position trading.
2. How much time can you devote to trading?
This is a no-brainer. If you have a full-time job, or you can’t afford to spend 12 hours a day in front of your monitor, then don’t try scalping or day trading (it’s silly).\
Instead, go with swing or position trading.
But, if you have all the time in the world and enjoy short-term trading, by all means, go ahead.
3. Does this FOREX trading strategy suit you?
Here’s the breakdown:
Most trading strategies will fall into 1 of 2 categories:
- A high win rate with low reward to risk
- A low win rate with high reward to risk
So, which approach is better?
Well, in terms of profitability both approaches can work because it depends on your win rate and risk to reward ratio.
So a better question would be…
“Which approach are you more comfortable with?”
If you prefer a higher winning rate but smaller gains, then go for swing trading.
If you prefer a lower winning rate but larger gains, then go for position trading.
At last, the main advantage of a liquid market is that investments can be easily transferred into cash at a good rate and in a timely fashion. For example, if someone owns $100,000 in U.S. Treasury bills and loses their job, the money in these Treasuries is easily accessible, and the value is known because it is a liquid market.