Forex

Fundamentally, trading strategy depends upon the time horizon and risk appetite of an investor. Trades for speculative purposes are placed based upon technical analysis indicators. In this context a short-term trader would select a chart based on day units typically minutes and hours. On the other hand a medium or a long term trader would prefer to use weekly or month charts for placing orders. Before selecting a trading strategy medium term and long term traders prefer to use a combination of technical and fundamental analysis. A technical analyst can follow several markets at a given time whereas a fundamental analyst would concentrate on 1 market and follow factors such as Government Policy, supply and demand or seasonal cycles. An ideal strategy should be based upon a healthy mix of technical and fundamental analysis.

The factors affecting currency trading are time zone liquidity, specific currency related issues, central bank activity and real and nominal interest rate differentials among others. The forex strategy should be based upon all these factors if a trader has a medium or long term view of the market.

Another important aspect of forex trading is risk management strategies. The one question that traders should ask themselves before taking the plunge is “How much am I ready to lose?”. Some of the issues that need to be focused are unexpected rate changes, delayed confirmation of payments and receivables or possibly lost payments.

Always place Limit Orders and exit the market at pre-determined profit targets.