Forex strategies - what it is and how applied
Forex strategies are ready-made algorithms for making decisions by a trader, a set of rules prescribing a trader to do certain things, as well as a set of indicators that allow him to determine different levels of price movements. If you read anywhere the phrase "Forex trading system", you should know that it also means a Forex strategy.
Why forex strategies are used for making money on Forex? The reason is that at this market only that part of the traders, who have been sticking to any particular strategy for a long time, have stable earnings. Such a strategy may be created by a trader or he/she may use an existing one which is adjusted to his/her own trading style. Those 5% of Forex market participants who are steadily earning on it are mainly owners of self-made strategies.
The rest 95% are traders who were blinded by false advertising, promising them fast earning with minimal knowledge and effort. They do not follow any strategies, all their trading is based on intuition and haphazard decision-making. Even when there are occasional profitable trades, the result is that they outbid subsequent losses. This also includes traders who have fallen into the "kitchen". Profit in such a situation is impossible.
There is another minor category of traders who for years have been looking for their only very effective strategy giving 100% effect. But there is no such strategy. It cannot exist as Forex market specifics make it impossible to reliably predict fluctuations of an impressive number of different indicators. It is impossible to close all deals at Forex with profit; losses are an obligatory component of such a business which is very risky. Therefore one does not have to avoid losses completely, but rather minimise them, which is why strategies are created for this purpose.
Forex strategies are divided into types and sub-strategies according to quite a few indicators and characteristics, but there are features that are mandatory for each strategy and are implemented during the execution of transactions. Every trading strategy must have these functions:
position opening; closing of a position with a loss (in this case a loss amount is preliminarily set up); closing a position with a profit.