An Insight to Short-Term Forex Strategies

There are numerous techniques and strategies for investing money in the forex market. The strategies differ mainly in the degree of risk that an investor is willing to accept, the assumed percentage of return and the withheld funds.

When choosing a strategy, the investor's temperament is extremely important - whether he likes to take big risks and if he can keep his temper under control.

Day Trading

Day Trading is a strategy of buying currency pairs and selling them on the same day.The Strategy provides the ability to open and close multiple positions, even a few to several hundred times on the same currency pair. Single profit from the transaction may not be big, but after adding the profit an investor can receive a return similar to the long-term strategy.

The big advantage of day trading is not holding positions overnight, during which an investor can sleep peacefully. Most brokers use the so-called rollover fees to withstand open at 5 am New York time.

The disadvantage of day trading, especially for novice investors may be traps that you can fall into. Often novice traders invest large amounts in many new open positions, do not use money management and thus often generate significant losses. In addition, novice investors often get over emotional - both when they win or lose thus trading with an unclear mind, leading often to very bad decisions.

Scalping

Scalping is one of the most popular techniques for day trading. The technique involves rapid opening and closing positions at a profit. Positions held in scalping are a few minutes or even a few seconds.

Scalpers do not seek large profits from each transaction, as in long term strategies. The Scalper strategy is to achieve small gains in a number of profitable trades.The size of profits and losses of each transaction is roughly equal, as opposed to long-term strategies, which mostly benefit from several times higher profits from winning trades than losses. To earn the same money, scalpers must perform more winning trades than losing.

Advantages of scalping

Reduced exposure to risk - scalpers utilize a small price movements taking place in a short time, so their positions are not subject to large fluctuations. Additionally, using a stop loss is possible to exclude large losses from a single transaction.

Gains in a quiet market - in most cases scalpers can earn even when the odds are against them. Scalpers can jump ahead a few pips as they use mostly bigger positions and smaller price changes.

Using economic and political news

Some investors prefer short-term investments and therefore use large fluctuations in currency pairs accompanying the publication of important economic data.

This strategy seems to be very simple, because in theory, just reading the news is positive or negative for the currency. It turns out however, things are not so simple, because the pre-release, many experts comment on the possible changes in economic indicators. The experts' speeches are able to change the mood of investors and affect the rates of currency pairs. If expert predictions do not work, then we can be confident that the market will react very rapidly.

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