A person, unlike a machine, is characterized by risk and emotions. To avoid losses caused by impulsive behavior, lack of patience and emotional turmoil, traders must stick to their own Forex trading strategies. Each trader has his own unique approach, although these strategies are based on generalized processes occurring in the foreign exchange market.
The most common strategies that novice traders use, often without even turning to books and complex theories, come down to analyzing charts that reflect fluctuations in currency rates. By applying geometric principles and evaluating patterns in graphs, upward or downward trends can be identified. Peaks and the time intervals between them serve as the basis for making decisions about buying or selling currency pairs. These methods, as well as more complex chart analysis techniques, are indicator-free Forex trading strategies.
On the other hand, indicator strategies are suitable for traders who prefer technical analysis. They are based on the study of various indicators specifically designed for Forex trading, including both free and paid ones. Over time, the set of indicators is updated, which leads to the emergence of new indicators and corresponding strategies. Graphical indicators, available to all traders for free, have made indicator strategies widespread, often used in combination with electronic advisors.
Indicators can be divided into different types. Trend indicators follow a trend, allowing traders to make predictable profits, albeit with a delay from the start of the trend. Oscillators, on the other hand, come into play during periods of calm in the Forex market. It is important to note that if oscillators are accurate, then trend signals turn out to be false, and vice versa. Volume indicators, which are less often used separately, turn out to be useful in situations where the level of activity of players is ambiguous, since they give an idea of the volume of trading operations over a certain time interval, guiding traders to make the right decisions.
For those traders who prefer to analyze fundamental market data and take a long-term approach, fundamental strategies can prove useful in Forex trading. These strategies involve carefully studying economic reports and monitoring important news that can significantly change the course of the Forex market.
In general, studying each group of strategies is a complex and time-consuming task. Traders tend to choose those strategies that suit their preferences, capabilities and understanding. They then diligently adhere to the rules provided by the chosen strategy. Trading without a strategy ultimately leads to failure.