Trading strategy types

trading strategy types

There are several different ways to analyze the Forex market for trading purposes. Though there are several categories of analysis, keep in mind that the end goal of it is to use the analysis to identify good trading opportunities and developing a profitable trading strategy.

Each trader should try all of them to define which one mostly suits his personality and could be treated as most comfortable to act.

There exist three main types of analysis and a trader should define which ones. Then, try out each of these areas to determine which of the three methods or combination of the methods works well for your personality. The three areas are:

  • Fundamental
  • Technical
  • Sentiment

Fundamental

Forex fundamental analysis is mainly related to the currency’s interest rate. Beside that the fundamental approach relies on the stats like inflation, manufacturing, economic growth activity, etc.

Usually, the fundamental news releases give effect to the future movement of the interest rates. Fundamental analysis also implies for the investors who want to have an ability for carry trade, i.e. gaining profits from holding high interest currency against a low one.

Technical

Forex technical analysis involves monitoring price action patterns, levels of supply and demand, support and resistance, etc. As a result, forex technical analysis is one of the most popular type of analysis.

Usually, traders that use this type of analysis on daily basis look into charts and use indicators, define short-term trends and try to spot the oportunities to get profit from the trading ideas that do not last for weeks and months. Over the web there’re plenty of articles regarding each inner type of technical analysis that a trader could implement in trading strategy.

Sentiment

Forex sentiment is another strategy used by professional traders. By sentiment it is meant analysis of order books, positions of the big quantity of traders and time&sales prints. This analysis type is not often discussed in the internet though has a high predictive power in case if used correctly.

Though, it’s difficult to automate this kind of strategies and it’s considered mostly manual, there exist several trader’s tools that could provide with particular info in a standartized way.