It does not matter if you have just started trading or have many years of experience you will always search for most profitable trading strategies. There are many different ways to trade, and so comes the beauty and complexity of trading. Many Forex traders use fundamental and technical analysis other follow highly sophisticated techniques which are based on statistical analysis. Definitely, no one will share how they earn profit, and you will have to find your own path.
One of the mostly used techniques in Forex trading is known as scalping. Traders who use scalping strategy seek to make small profit by entering the market in very short time intervals. The main objective is to place buy or sell orders at the bid or ask price and then rapidly exit when minor profits are recorded. Usually, when such alternative investment management strategy is implemented, traders place from ten to one hundred or even more trades during one trading day. The goal is to get many small profits which will add up at the end of the day. As well as keep away from having big losses. If a trader follows a strict exit strategy many small gains can grow to a bigger profit after he ends his trading session. However, when a trader ignores and does not follow his exit strategy, one big loss that can appear might take away his profit that he was working for a long period.
Let’s say one of your alternative investment management strategies is scalping. Certainly, you take into consideration that selected trend will move to a desired direction for a while, and you will enter the market by placing an order. However, scalpers think that after they exit from the market then the direction of a trend is uncertain. Mostly, scalpers trade on short time intervals like one minute.
There are several types of scalping strategies employed by traders – “market making”, “large volumes”, “traditional”. When “market making” strategy is used, trader tries at the same time place bid and ask orders for a selected currency pair and get advantage on spread. Trader must search for stationary currency pairs which are traded on large volumes. However, expected profits are very low. The second strategy “large volumes” is done by buying or selling large numbers of currency pairs and waiting for small movements in price, usually measured in cents. The last type is close to traditional trading and is entitled to “traditional”. Trader who uses this method will enter the market for a short time interval as his trading signals arise. In principle, trader will always follow 1:1 risk/reward ratio.