Forex trading has become the most lucrative financial market in the world-trading almost $7 trillion every day! For new traders and pros alike, this market provides the opportunity to compete at the highest level, but only if you know what you are doing.
For most people, the forex market is volatile, risky, and unpredictable. However, for those who know how to navigate this money market, it can be the goose that lays the golden egg.
To understand just how big of a deal forex trading is, here are some facts that will interest you from a recent Triennial Central Bank Survey.
- The most popular asset class is Spot forex, trading $2 trillion transactions daily
- The major currency pairs IN 2021 are USD/YEN(18%), USD/EURO(24%), USD/GBP(9.3%), USD/Australian Dollar(5.2%), USD/Canadian Dollar(4.3%), USD/Chinese Yuan(3.8%), USD/Swiss Franc(3.6%)
- A lack of proper strategy makes up to 71% of retail traders lose money in the fx market. Even more concerning is that up to 99% of traders fail to profit in their first year of trading.
- Only 10% of fx traders are women. Interestingly enough, female traders are more successful than their male counterparts by almost 2%.
- Thorough and consistent fundamental and technical analysis increases your chances of success by up to 30%
- As of June 2021, the forex market had an estimated value of $2.409 quadrillion with 170 active registered currencies.
- Trader demographics indicate that most fx traders are between 34-45 years (43.5%) and the lowest between 25-34 (5%). People over 45 make up about 15%.
Now that you’ve gained some perspective into how massive the forex market is, you can research the type of trades you think will suit you and build your trading portfolio. The more you learn about and scrutinize the market, the higher your chances of making profits.
While statisticians indicate that 99% of fx traders fail to make profits in 4 consecutive quarters, there is still an opportunity to slide into the 1%. All you need is a good strategy and some effective action points.
Forex Strategies That Work in 2021
Below is a list of Techniques that you may find invaluable in your quest to develop a full-proof trading strategy
1. Range Trading
This technique is very effective when the market has no direction. You want to make the most profits and minimize your losses. In this case, range trading will help you identify support(Overbuying) and resistance(Overselling)points. In principle, you buy an asset when it is overselling and sell it when it is overbuying.
Range trading works best in horizontal markets with low to medium volatility and sideways trends. For day traders, this strategy manages risk and improves your chances of success.
The primary strategy when day trading is to identify a non-trending market by utilizing moving averages. You can also use ADX (Average Directional Indexing) to locate these trends. The idea here is to carefully select stocks that are low risk and suitable for range trading.
2. Position Trading
If you want to build a long-term portfolio in fx trading, then position trading is the strategy you should master. It involves analyzing the market in a broader, more clear-cut picture, utilizing fundamental analysis as the primary technique.
The idea here is to hold a position for a lengthy period, ignoring price fluctuations. The reason position-trading has become popular in 2021 is it provides an opportunity for huge profits. It is also not affected by short-term price movements.
Position trading is one of the few techniques that successfully merge fundamental and technical analysis, creating a system that accurately identifies precise trade entry and exit points.
3. Forex Scalping
99% of fx traders do not make profits is that they try to win big instantaneously. Learn to develop a strategy that takes small wins regularly. Keep in mind that the ultimate goal is profitability.
Forex scalping is one such strategy. It allows you to clock in small profits frequently. The trades may have minimal returns, but they happen in small time frames. Essentially, with the right technical analysis platform, you can identify support/resistant points, plot entry/exit points, and make profits all day in 30 min intervals.
Scalping works with highly liquid currency pairs, so frequent price movements can work to your advantage. Scalping is also a minimum risk strategy, so you can open multiple positions a day without threatening your entire trading portfolio.
There are several other strategies you can use to trade profitably in 2021-including trend and price action trading. However, the above techniques are relatively low risk and particularly useful for novice fx traders.