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When working on the financial markets, traders can utilize dozens of different strategies.
It is worth saying that there is no ultimate one-fit-all strategy that works for all traders, all instruments and all timeframes. Each trader has to develop a trading strategy of his own. What trading strategy is the best? There is no clear answer to this question, as some strategies that have demonstrated decent results in the past do not work today. Put shortly, an optimal strategy is the one that works. Or, in other words, the one that consistently provides positive returns. If the strategy consistently provides negative results (the trader is losing more than he is earning), this strategy should obviously not be used.
As already mentioned, as there is no single «best strategy», traders may want to look at several factors when developing a strategy of their own. First is the instrument they want to trade. It is no secret that that Stocks behave differently than Forex, and ETF trading is quite different from cryptocurrency trading. Hence, the first rule. Decide on the financial instrument before developing a strategy. Secondly, choose the time frame you want to trade. Intraday trading is radically different from value investing. Choose the time frame first and decide on the strategy second. We have covered the time frame and chart types in our previous article. Thirdly, adjust your trading strategy to your trading style. As in life, we are much more likely to be successful in something that we like. The same applies to trading. If you don’t like how a particular strategy works, find another one. It is as simple as that.
Now, to the strategies themselves. As already mentioned, trading strategies are numerous. This article is not enough to list all of them. Nevertheless, we can provide a list of the most notable ones.
Day trading is a strategy that implies that all positions are being opened and closed within the same day. This strategy is common among Forex traders. Currency pairs can demonstrate decent movements over the course of one day. Moreover, the use of leverage can turn miniscule price swings into tangible gains. Forex, however, is not the only asset class to be traded like that. Cryptocurrencies, for example, can also be traded on a daily basis. One thing that is absolutely required for day trading is high volatility, as it is impossible to trade when the market is flat.
A strategy that is commonly used with stocks, value investing implies that the trader first has to find the discrepancy between the market and the intrinsic (real) value of a particular stock. In order to do this, he will go through earnings reports and key financial metrics. If the intrinsic value is higher than the market one, it is wise to buy the stock. Conversely, if the company is traded at a price that is higher than its intrinsic value, it can be expected to go down (the time when this will happen, however, is not set).
Swing Trading Strategy
When using this strategy, traders try to capitalize on the sudden price swings, hence the name. In a lot of markets, and for a lot of assets, sudden price movements are quite common. One way to apply the swing strategy is to find a strong trend and wait for a retracement. A retracement is a short-term move in the opposite direction that doesn’t change the direction of the bigger trend. When the retracement happens, the asset price will depreciate, but since it is only a retracement and not the trend reversal, the price can be expected to go up again. All in all, this is a practical application of the ‘buy low, sell high’ technique.
Scalping is a subtype of the day trading strategy. As in day trading, all deals are being opened and closed within the same day. Yet, the number of deals and their duration will vary significantly. When applying the classic day trading strategy, you can open as little as one deal and it will still classify as day trading. In scalping, things are a little bit different. Traders open a big number of deals, stacking up small gains over time. In scalping deals can be as short as a few seconds. All in all, it is an interesting strategy that a lot of traders, especially on the Forex market, find useful.
Political and economic news have the potential to affect the asset prices and move the entire markets. Here are two examples to illustrate how powerful news trading can be. On the Forex market, traders buy and sell national currencies in pairs. Their exchange rate is a good proxy for the well-being of the respective national economy. When the American economy flourishes, so does the USD, and vice versa. When the US economy is in crisis, the USD will also depreciate. Of course, it is more complicated than that, but the general idea is roughly like this.
Forex is not the only market that is affected by the news. The equity market, where corporate stocks are traded, is another example. Corporate news, like an appointment of a new CEO or a new sales milestone, can make the company move up or down. People, interested in stocks trading, have to follow corporate news and evaluate the overall business climate in order to make well-rounded decisions.
These are the 5 common trading strategies. Of course, they are not limited to these, as there are endless opportunities on the market. Yet, for those willing to start somewhere, this list can provide an idea or two. Choose the one that suits your trading style and you are good to go.
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There are several factors that affect this exchange rate: The Economies: Of course, the two economies have a role to play. A stronger economy means higher interest rates that attract more foreign investment. The demand for local currencies (USD and JPY respectively) will go up and the USD/JPY value will be affected accordingly. On the flip side ... FXStreet is a leading source for reliable news and real time Forex analysis. FXStreet offers real-time exchange rates, charts and an economic calendar. Forex Market Economic Calendar for Monday 26th March 2018. IQ Option · 26.03.2018. Who Will Win the Trade War Now? IQ Option · 24.09.2018. Economic Calendar for July 20th: Will ECB Keep Interest Rates Unchanged at 0.00%? IQ Option · 20.07.2017. 5 Top Reasons Why the Windows Phone Is Dead. IQ Option · 17.10.2017. Go to IQ Option; Research; Trading Tips; Download App; Open Free Account ... News can change a market situation in a moment. If the news is positive, currency rates or stock prices usually go up. If the news is negative, they go down. That’s why news trading has two sides. So, News Trading : which news should a trader follow? The first point of interest is economic releases, or economic news. Which are main part of ... The forex market economic calendar today has important events and releases that can affect the forex market, the most important ones being the Unemployment Rate in Australia, the Retail Sales in UK, the Trade Balance in the Eurozone and economic data about the labor market and housing in US. As liquidity will return to the forex market after the public holiday yesterday moderate to high ... Forex. Forex. Forex ... The main reason for this depreciation was due to several economic events which affect US Dollar negatively. More specifically, the Federal Reserve increased short-term interest rates two times in 3 months to control the domestic inflation rate. Similar currency. All currencies. NZD/JPY. NZDJPY. 69.1265 +2.02%. EUR/DKK . EURDKK. 7.45379-0.04%. AUD/CHF. AUDCHF. 0.663245 ... You simply choose the parameters that interest you, such as the amount you’re willing to invest, forex rates that need to be reached, assets that interest you etc, and the program will open a trade when the market conditions for that are met. This can be an excellent way to make sure you never miss a trading opportunity because you surely won’t be spending entire days waiting for that one ... Central bank interest rate (also called overnight rate) is the rate, which is used by the country's central banking institution to lend short-term money to the country's commercial banks.Interest rates also play an important role in Forex market. Because the currencies bought via broker are not delivered to the buyer, broker should pay trader an interest based on the difference between "short ... Other factors which affect the currency prices are economic data of big countries, geopolitical tensions and interest rates. If you are looking forward to being a trader, you should understand that learning trading in Forex market is not that difficult but much practice is required to get that real success with currencies. NOTE: This article is not an investment advice. Any references to ... Forex — the foreign exchange (currency or FOREX, or FX) market is the biggest and the most liquid financial market in the world. It boasts a daily volume of more than $6.6 trillion.Trading in this market involves buying and selling world currencies, taking profit from the exchange rates difference.
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How Interest Rates Affect the Market - Duration: 1:29. Investopedia 106,953 views. 1:29. Language: English Location: United States Restricted Mode: Off History Help About ... Master Interest Rates And Master The Forex Markets - Duration: 6:22. ... How interest rates affect interest rates, financial flows, and exchange rates - Duration: 7:45. Khan Academy 9,960 views. 7 ... If the U.S. economy appears to be in trouble, the Fed might cut interest rates to drive economic growth. When the Federal Reserve raises or lowers interest r... In this video, we recap the general effects of interest rate changes on currencies and then explore how central banks use interest rates to control inflation... Free Webinar: How to Grow Your Wealth: https://en.samt.ag/ How do the interest rates affect the stock market? When you listen to financial news or read about... Interest rate environments influence different sectors of the economy, but how closely are they correlated? Using ETFs that trade the utility sector, real estate sector, equity market (S&P 500 ...