The Forex market is the largest and most liquid investment market in the world. There are many ways to trade Forex, but not all methods are suitable for every trader. Therefore, it is important to choose a method that suits your needs and trading style. Some people prefer trading methods that allow them to trade on the go while others like a method that is more based on technical analysis. In this short write-up, we’ll be discussing how you can choose a Forex trading strategy that suits your style. Know more forex and cfd broker
Choosing Your Forex Trading Method
Every trader must be aware of the dynamics of the market and understand when and how to trade. For this to happen, some study factors that influence the market, while others study analytical charts. Fundamental analysis is when you track the interest rate of the currency. The rate of interest has a considerable effect on the market, together with GDP, inflation, economic growth, and manufacturing.
Technical analysis in forex markets involves the study of price history to understand when and where to exit or enter a trade. Since it is a liquid market, studying the chart reveals clues about the supply and demand flow. Sentiment analysis is another method where you see a big crowd buying a currency. You understand eventually, they will want to close the trade so that they will be future sellers. You can predict the way trade will move.
How to Calculate Expectancy from Your Strategy
This process allows you to calculate your estimated profit for a trade. In cases the calculation is negative, the strategy fails. The strategy that works is a winner. You calculate the average loss and gains to determine the expectancy. Try for a higher win % to secure a positive expectancy.
The formula is:
(win% * average winning size) – (loss% * average loss size)
If the outcome of the formula is positive regardless of win or loss percentage, you can conclude that it is a positive expectancy. Expecting to make small profits and not calculating the losses is one of the biggest traders make. Suppose you make a small profit margin over multiple trades and incur more considerable losses for lesser trades; your expectancy will be negative.
