+234 802 828 1192
+234 818 204 5184
+234 813 925 0268
Posted on Jan 16, 2015 at 08:10 PM
Identifying and understanding the most suitable approach for Forex speculation goes a long way in increasing your profitability
One of the key influencers in your trading success is the approach you use to speculate in markets. The three most common approaches used to speculate in the Forex market are:
We will explain each of these approaches in brief and hope it will guide you in deciding on which approach to use.
The long term approach: one advantage of this is that it is easier to work profitably with it, in that because it is long term, each candlestick has more information in it compared to a shorter term.
The optimal timeframes to use in the long term approach are the weekly and daily charts. Traders utilizing a longer-term approach can look to use the weekly chart to grade trends, and the daily chart to enter into positions.
After the trend has been determined on the weekly chart, traders can look to enter positions on the daily chart in a variety of ways. Many traders look to utilize price action for determining trends and/or entering positions, but indicators can absolutely be utilized here as well.
The ‘Swing-Trader’ Approach: this approach falls in between the long term approach and the short term approach in that you will get the benefits of both styles without necessarily taking on all the down sides.
The optimal timeframes used here are the daily and four-hour charts. The daily chart is used to determine trend of market direction while the four-hour chart is used for entering trades or placing positions.
Swing-Traders will often look at the chart throughout the day in an effort to take advantage of ‘big’ moves in the marketplace; and this affords them the benefit of not having to watch markets continuously while they’re trading. Once they find an opportunity or a setup that matches their criteria for triggering a position, they place the trade with a stop attached; and they then check back later to see the progress of the trade.
The Short-Term Approach (Scalping or Day-Trading): of all approaches, this seems to be the most difficult of all because it is probably the most difficult approach you can use to find profitability.
This short-term approach is best left for professionals because so many factors of complexity are introduced here and it only affords a smaller margin of error
The optimal timeframe for the short term approach are the Hourly, 15 minutes and 5 minutes timeframes. When scalping or day trading, you can look to grade or evaluate trends on the hourly chart; and can then look for entry opportunities on the 5, or 15 minute time frames. The one minute time frame is also an option, but extreme caution should be used as the variability on the one-minute chart can be very random and difficult to work with.
If you need more information, mentorship or clarification about any of the trading approaches, feel free to contact us and one of our professional analysts will be glad to give you a response.