Your trading personality also incorporates your ideas on investing. Are you the kind of person who is looking for value? Are you willing to catch the market and buy when others are selling or do you like the idea of jumping on a trend and getting off as soon as it accelerates? These concepts will help you determine if you are looking to trade a short-term or a long-term strategy. Remember, if you don’t have the time to watch the markets actively during the day, then a short-term strategy will likely be the wrong fit.
Types of Trading Strategies
There are several strategies that you can use based on your trading personality. If you like long-term trading strategies, you might consider the trend-following strategy. If you are more interested in short-term trading strategies, you can consider scalping or swing trading.
Long-Term Strategies
There are a couple of long-term trading strategies that are great for traders who are not looking for instant gratification. Two of the most popular are trend-following and contrarian trading strategies.
Trend Following
A trend-following strategy is one where you attempt to capture a trend where the exchange rate of a currency pair moves in the same direction for an extended period. One of the most efficient trading indicators that you can use to identify a trend is the Moving Average Crossover trading strategy. A moving average crossover uses two different moving averages to identify a change in the direction of a trend.
A moving average is used to smoothen the change in price action. A moving average is calculated by determining the average over a specific period. For example, the 20-day moving average is the average for the last 20-days. On day 21, the first exchange rate in the period is a drop, and a new average is calculated.
