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Two Short-Term Forex Market Trading Strategies That Can Make You Money

Currencies / Forex Trading Mar 23, 2016 - 02:49 PM GMT

By: Nicholas_Kitonyi

Currencies

There is much debate amongst experts about whether a buy-and-hold strategy or active short-term trading will earn you higher returns in the long run. There are numerous stories about people successfully turning a few thousand dollars into over a million dollars, by sitting at home in front of their computers and actively trading the market every day. On the other hand, many financial experts believe that buy-and-hold is the way to go as the majority of actively managed funds do not outperform their benchmark indices.


At the end of the day, it is for you to decide whether you want to actively generate short-term returns on a regular basis or you want to generate returns long-term on a more passive basis. Should you decide to take the more active approach, and trade the markets daily, then consider these two short-term trading strategies, which could make money for you.

Jumping on mini trends after big market moving events

A great way to make money trading is by keeping your eye on major market-moving events, such as economic data announcements or big news headlines, and then trade off the back of them. For example, if the U.S. unemployment numbers come in much better than expected, then the USD will rally against other currencies as the U.S. economy is in better shape than expected and the Federal Reserve Bank will likely raise interest rates sooner.

As soon as this data is announced, you could for example buy binary options on USDGBP and USDJPY with a 15 minute time horizons and benefit off the mini- upward trend, which is almost certain to occur after such an announcement. Alternatively, you could buy a binary call option on a European stock index; right after the European Central Bank announces an interest rate cut and further measures to boost the Eurozone economy. In this instance, a mini-uptrend in equities is almost certain, so this creates a great opportunity to profit from this trend using binary options.

If you want to put on short-term trades using binary options it’s important that you choose a binary options broker that covers all the markets you want to trade and offers a good service with an easy-to-use trading platform. It is best to read through several brokerage reviews, such as the Finpari review, to ensure you find a good brokerage to execute your trades with.

Using a combination of technical indicators
Another great strategy to use when putting on short-term trades, to generate regular weekly income, is to use a combination of technical indicators to make trading decisions. However, when trading using technical analysis, it’s important to note that you should only be using this strategy for liquid securities such as stock indices, commodity futures, blue chip stocks and the most liquid currency pairs, such as the EURUSD, USDJPY, GBPUSD, etc. Secondly, you should never trade off signals from only one technical indicator. The key to generating trading profits using technical indicators is to use a combination of indicators that complement each other.

For example, a technical analysis-based strategy would be to use the MACD (Moving Average Convergence Divergence), Bollinger Bands, the Relative Strength Index and the On Balance Volume indicator. Combining these indicators you can gauge price movements based on moving averages, momentum, volatility and volume, The way you turn these indicators into a trading strategy is to trade when 4 out of the 4 indicators give you a buy signal, you buy.

Alternatively, if 4 out of 4 indicators give you a sell signal, you sell. This would be a strong trading signal. If 3 out of the 4 indicators give you a trading signal, you can also trade. If 2 or less of the indicators indicate you should execute a trade, you leave it, as the trading signal is not strong enough. Trading only strong trading signals, of the right combination of technical indicators, is a great strategy that can be used to generate regular short-term trading profits.

By Nicholas Kitonyi

Copyright © 2016 Nicholas Kitonyi - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


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