Devising a Forex Strategy That Will Work Over Time - Part I

Many retail traders begin their forex trading careers in the same impatient, gotta make money quick way, leading ultimately to irrational trades and the loss of their starting capital. Since there is so much money to be made with forex trading strategies that work, we will focus on helping you devise a plan that will allow you to turn a profit over time, not overnight. A key factor in any successful forex trading strategy is profit, how much, how soon, and here we will discuss which forex trading strategies will work best for your wallet.

One of the most common, and perhaps most often sought after by first time forex traders, is the scalper. The scalper's goal is to open and close each trade within just a few minutes to take advantage of the smallest fluctuations in price using tons of leverage. This trading system relies heavily on quick action based on the most insignificant of changes in the foreign exchange market. The upside to this forex trading strategy is that the profits (or losses) you make will happen fast, the bad news is that it requires a significant amount of capital and risk, associated with the amount of leverage required to make a profit.

At first glance one would think that a long term forex trading system would be the simplest and most profitable, since that's true of most any other financial transactions. However, forex trading is different in this regard. Long term forex trading requires a great deal of knowledge because long term traders hold their positions for months, sometimes years waiting on hard and fast factors that are fundamental to the foreign exchange market. This trading strategy is more reliable in the long run simply because it's based on reliable forex indicators, rather than insincere market changes. Like scalping, long term forex trading requires a large amount of capital to cover any unpredictable changes against your open positions, which may remain open for a very long time.

If you're looking for more stable rewards in the foreign exchange market, consider mid-term trading, which allows a trader to hold positions for at least one day and take advantage of opportunities that may arise due to technicalities, such as a delay in trading at the beginning or end of a forex trading day. A forex trading strategy that focuses on medium term trading requires the lowest capital because you only need additional leverage to increase your profits. Unfortunately, as with all good things there is one minor drawback, the infrequent opportunities to implement any forex trading system on account of medium term forex trades being more difficult to locate and execute.

Just as with Goldilocks and those three bowls, you too will have to devise a forex trading system that's just right. Remember the reason you began trading was to make a profit, and that can only happen when you devise a strategy that fits with your financial goals and capabilities. If you don't have a lot of capital to risk, because it is a risk, start with a medium term forex trading strategy.

Andrew Daigle owns many successful websites including ForexBoost, a free Forex educational site to learn Forex trading strategies and partners with FX Instructor for live forex trading sessions and professional educational services.

This article was published on 24 Jan 2010 and has been viewed 1551 times
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