A good Forex trader should know many investment strategies, and when to use what, in order to gain significant profit from the currency trading market. A more sophisticated understanding of the numerous methods would help him to make right calculations about the price movement of the market even in advance. Forex market is a market that is ever changing, the exchange rates fluctuate all the time, so it is easy for a trader to trade hysterically when he or she is off guard - simply going along with the emotions or follow all the news advices from unknown sources.
Forex trading strategies can be broadly divided in to two types: the profit maximizing ones and risk elimination. The strategy really differs with the trading styles of the individuals and their investment experiences, also the degree of 'rockiness' of the market trend. There are many factors determining what strategy to call upon: the size of the trader's initial investment, overall account size, personal trading ability, risk level he or she can tolerate, the combination of the currency pairs trading and its 'popularity', frequency of looking at the graphs, etc. The most determining factors are: the financial broker the trader has chosen, the trading system used, the time goal of attaining a certain amount of profits.
Leverage is the very popular trading strategy of maximizing profit, it allows forex traders to accumulate their assets and trade with more funds than what they have. Forex brokers give leverage to their clients. The usual ration is 100:1 - i.e., for $1 he can borrow $100 from his broker. The ration can vary a lot based on the contract requirement. Day traders usually can ask for more leverage.
To lower the risk, the main strategy used is the stop loss order. Traders limit their losses by freezing a trade at a pre-determined price decided by the traders. To trail the stop losses means when the currency prices drop, it is followed by proportional stop loss prices. Stop loss orders is a very versatile function, one can decide when and at what level he or she wants a 'stop' for the trade.
