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Things you should know about forex

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Dream chaser

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How to Choose The Best Forex Trading Strategy
Before we proceed to discussing the most popular Forex trading strategies, it’s important that we understand the best methods of choosing a trading strategy. There are three main elements that should be taken into consideration in this process.



Time frame
Choosing a time frame that suits your trading style is very important. For a trader, there’s a huge difference between trading on a 15-min chart and a weekly chart. If you are leaning more towards becoming a scalper, a trader that aims to benefit from smaller market moves, then you should focus on the lower time frames e.g. from 1-min to 15-min charts.


On the other hand, swing traders are likely to use a 4-hour chart, as well as a daily chart, to generate profitable trading opportunities. Hence, before you choose your preferred trading strategy, make sure you answer the question: how long do I want to stay in a trade?


Varying time periods (long, medium, and short-term) correspond to different trading strategies.



Number of trading opportunities
When choosing your strategy, you should answer the question: how frequently do I want to open positions? If you are looking to open a higher number of positions then you should focus on a scalping trading strategy.



On the other hand, traders that tend to spend more time and resources on analyzing macroeconomic reports and fundamental factors are likely to spend less time in front of charts. Therefore, their preferred trading strategy is based on higher time frames and bigger positions.



Position size
Finding the proper trade size is of the utmost importance. Successful trading strategies require you to know your risk sentiment. Risking more than you can is very problematic as it can lead to bigger losses.


A popular advice in this regard is to set a risk limit at each trade. For instance, traders tend to set a 1% limit on their trades, meaning they won’t risk more than 1% of their account on a single trade.
 

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