Advanced Forex Trading Strategies

Posted by forex on August 23rd, 2010

Forex market is the largest market with the daily turnover of around 2 trillion dollars. High liquidity and easy trading are attractive factors of this market.

Today forex market is more advanced than ever before, you don?t need to go out of your home, sitting at home you can trade. There is no constraint on the investments. You can start trading with even $100. All these factors are attracting large number of people into this market.

Forex market has a high potential of making huge profits, but like any other market in the world forex market is not risk free. Currency rate of a particular country are relying on many complex factors, it is very difficult for one to predict, which currency price will go up or down. However there are some techniques which can reduce your risk and increase the profits. Forex scalping, forex hedging, forex position trading are among these advanced techniques.

FOREX SCALPING

This is a new technique of trading where trading is done in small time frames. This technique is called forex scalping. In this technique smaller profits are taken in a small time frames. As a result position is exposed to relatively small time frames. It reduces risk of making huge losses due to any undesirable market movements. This technique is quite different technique compared to other techniques.

Using this technique you can reduce your losses and increase the profits. Even if you are using this technique, it is very much necessary for you to do some market analysis to decide which currency pair to trade.

FOREX HEDGING

This technique reduces your risk of holding open position. It reduces risk by taking two sides of trade once. If your broker is permitting, easy way to hedge is to start a long and a short position on the same currency pair. Some traders are using two different currency pairs to form one hedge, but that is very complicated. The main motive behind hedging is to reduce your losses from holding open position in the market. If the market falls sharply, you would accumulate huge losses. If you have an open position with a good projection but you are not sure and fear that projections can go wrong, then it is recommended that you hedge that position. Hedging is something sort of insurance, you can?t stop bad things happening, but you can reduce the impact of it.

Forex Position Trading

This technique is another technique to boost your profit with reducing your risks. This type of trading is effective in small lots. Big advantage of this technique is that your exposure to the market is small and chances of making profits are there. Let?s take an example. You make a small lot trading at EUR/USD at 1.50 and contrary to your expectation market moves to 1.52, so you make another small trade at 1.52. Now average of two lots becomes 1.51. So when market moves below 1.51 you will start making profit. Advantage of this technique is that your exposure is in small lots, so your risk is reduced. It is necessary to do the market analysis even if you are using this technique.

These techniques are based on market behavior and help you to reduce your risk and increase the chances of making profit.