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Despite some rhetoric to the contrary, forex trading should not be considered as a “get rich quick” scheme. This is borne out by the sheer number of loss making accounts, with as many as 70% of traders losing money on a regular basis.
However, do not turn away from forex just yet! it is still possible to achieve a profit as a forex trader, while there is even the potential to create relatively quick wins when investing in currency.
We will explore some of the key strategies for achieving this objective below, as you look to optimize profits and make the most of your capital within a relatively short period of time.
Watch the Moving Averages
In forex trading, the term ‘moving averages’ refers to the average price of an asset or security over a predetermined period of time.
The most common timeframes include 15, 20, 30, 50, 100, and 200 days, with the idea being to identify and accurately determine the trajectory of a targeted price. The timeframe that you use will depend on your wider forex trading strategy, with scalpers and day-traders typically analyzing price performance over 15 days.
Ideally, you will see an asset or currency pairing that’s sloping upwards, although you may hope to identify securities moving in a different direction when shorting.
The MetaTrader 4 platform enables you to watch moving averages in real-time, leading to more informed decision-making in the process.
Understand Market Cycles and Patterns
While there are very few fixed and irrefutable rules in the world of financial market trading, most niches tend to trade in cycles.
So, it is very important to keep your eyes on the calendar at certain times, especially as currency prices are also impacted directly by specific data releases and recurring, underlying trends.
Most of the successful forex traders actually believe that the forex market has a surprisingly clear cycle, which is driven by innate human behaviors and their impact on price, demand, and trading volumes; and therefore tend to profit a lot more often than they lose.
Make no mistake; if you are able to identify and chart these trends successfully, you will improve your chance of success while optimizing short-term profits.
Develop a Sense of the Prevailing Market Trends
Like all financial markets, the foreign exchange is sensitive to market sentiment, which can in turn cause prices to rise or fall accordingly.
While this can underpin widespread volatility, it also provides valuable insight to traders, who can use this to predict future price movements and the likely course of travel in the marketplace.
If the trend is negative, for example, you may want to consider shorting assets. This is relatively easy in forex trading, as it simply requires you to short one currency directly against another.
This enables you to leverage volatility and profit from the derivative nature of currency trading, which means that you do not have to assume ownership of the underlying financial instrument at any time.
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