Three Popular Forex Investing Strategies
When you start investing in Forex and everything is still new to you, it is easy to feel overwhelmed by all the different strategies that different traders use. How on earth do you decide which is the best strategy for you when there are so many to choose from?
In this article, we will look at five of the most popular forex investing strategies. The reason these strategies are so popular is twofold. One, they are simple to follow and two, they produce good results, particularly when used in combination.
1. Moving Average Crossover – Forex Investing Strategies
This is probably the most simple of all trend-following strategies and any novice trader can use this. All you do is follow two separate moving averages (e.g. 5-day and 10-day). When the two moving averages cross, it presents you with a signal to trade. For example, if the 5-day average crosses the 10-day average, buy or sell in the direction of the 5-day average. Close your position when the averages cross in the other direction.
2. Stochastic High-Low – Forex Investing Strategies
Stochastic oscillators can determine levels of support and resistance. A popular strategy is to buy when the price approaches the stochastic support level below the market and to sell when it approaches the stochastic resistance level above the market. This is also known as “swing trading” and can be very successful in non-trending markets.
3. RSI High-Low – Forex Investing Strategies
The RSI (Relative Strength Index) is another popular technical analysis indicator that is often used to determine entry and exit points. In essence, it shows the strength or weakness of the current price relative to historical prices, based upon momentum in the market. Most basic trading systems will calculate the RSI, which was originally developed by J Welles Wilder in 1978.
By using the above basic indicators together, you can develop a strong forex trading strategy. The principle is to use the Moving Average Crossover in trending markets, the Stochastic High-Low in non-trending markets and the RSI High-Low to help you figure out if the market is trending or not.
Good luck and happy trading!