Investment-Strategy

How to choose the right investment strategy?

What forex investment strategy will be right for you?

Selecting a strategy of investing in forex trading can be a very subjective matter. This follows simply from the fact that there is no single correct way to invest on the currency market. I hope that those few questions and answers will help you decide which forex investment strategy might be suitable for you.

Short-term or long-term strategy?

How do you look at forex? How do you see your forex investment opportunities? Do you pay more attention to short or long-term market assessments? Answers to these questions should have a major impact on forex strategy you plan to use. Deciding between long and short-term investments is based on many factors.

Firstly, you should consider your age and goals that you put yourself as an investor in the forex. If you are young and you have quite a large amount of funds to invest, then you should consider investing short term. You may be interested in strategies for the forex day-trading if you want to start seeing results right away. Keep in mind, however, that day trading is much more demanding and difficult than opening position for a few days or a few weeks.

If you are a bit older and treat forex primarily as a way to diversify your investment portfolio, then you should consider in investing in the long term, thus opening the position for a few weeks, months or even years! This type of investing in forex is much safer and less stressful and, overall, tends to achieve a much better return of investment.

Those who invest for short periods or very short periods of time, actually … are not investing – rather, they are playing in the forex. Short-term investments usually make it either inappropriate to analyze the available clues and factors, or just the opposite – confusion and chaos of information due to the attempt to use too many indicators at once. Long-term currency traders, after a thorough analysis can open a position and basically leave it on the months in anticipation of achieving its desired level, and possibly controlling the previously set stop loss levels.

Daily schedule

What is your plan for the day? Many people begin playing on the forex and treat investment as a source of additional income, and don’t intend to make the trading their full-time job. If you are a person who wants to invest in the forex, but have a busy schedule – work, family, etc., Then you need to decide on a strategy that will allow you to open the position, and then leave your computer alone for 24 hours or even longer. Many investors are successful using this approach, because it eliminates making investments under the influence of emotions, leading to impulsive and hasty decisions, which often lead to losing money in the end.

Emotional pressure and efficiency

Investment strategies that are based on the use of lagging indicator, which confirm the long-term trend (rather than trying to predict one), or “robots” to invest in the forex (programs that send signals), especially during the investment based on the analysis of very short charts, may in many cases lead to the formation of a strong emotional pressure. This is due to the intensity of positions opening and low capacity to adapt such a strategy.

Emotions are the greatest enemy of investors and the biggest obstacle to success in forex. For that reason it is worthwhile to avoid very complex investment strategy or strategies that you do not fully understand, and which are associated with investing in short periods. Of course, you can’t say that one can’t succeed in the short term investing, but then it is necessary that you use simple forex trading strategy, so that you can remain calm and objective by investing at a higher frequency.

It is very difficult to assess the effectiveness of an investment strategy, until we actually try it out in practice. There are a few factors that you should look for, which make up for an effective investing strategy. Professional investors are well aware that the simplest ways of investing in forex are the best, because success in forex trading is mainly the result of strict discipline and proper psychological approach. Therefore, investing methods that allow you to draw logical conclusions, and which are not difficult to understand, are usually the most beneficial. Before you make a final decision on the investment strategy, it is useful to examine the overall efficiency of particular forex trading strategy.

Personality

Personality type is also one of the factors that have an important impact when it comes to choosing investment strategy. Are you a person that has a mathematical mind, or perhaps you’re a creative person, or maybe you’re somewhere in-between? A certain type of personality will make particular group of people to use the strategies that apply certain settings, and rigid rules, and other personality types will feel better using strategies that require more interpretation and risks. If you are a person who is rapidly losing patience, then you should opt to invest for short periods to quickly be able to see the effects of your decisions.

Chapter 3: The three basic forex strategies that every investor should know

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