Forex trading is a huge money making venture involving exchanging currencies over the counter with no centralized exchange. Investors from all over the world enter everyday in this mega profit generating market with an expectation to generate profit by investing whatever they can. Small individual investors to large enterprises all participate in this vast money making game irrespective of their geographical position. They just need to have access to internet as the whole business of forex trading is carried out through the network of computers for connecting traders all over the world. Before you also feel excited to dive into this vast profit making pool to earn colossal profit for small investment you need to understand forex trading strategies in order to play at safer end.

Leverage

Leverage is the most important strategy in trading forex. It involves borrowing money from broker to invest into certain trade in forex. This strategy is used to make profit out of momentary fluctuations in currencies values. As this amount is provided by broker so investor first opens a margin account with him after that he can get amount of leverage by the ratio of 50:1 100:1, 200:1 or even more. Mostly standard trading is carried out on 100,000 units so in order to trade $100,000 an investor has to deposit only $1000 in his account. After that he will get be able to trade $100,000 by having leverage of 100:1. This ratio seems really larger than 2:1 ratio offered in case of equities but the reason is that currency fluctuation during intraday remains less than 1% unlike equities. So Forex brokers are able to offer such huge leverage to invest in.

Though leverage can maximize the profit potential up to 100 times or even more, but it also carry equal chances of causing unexpected upsets if currency values fluctuate to an extent an investor is not expecting. That is why other strategies of limit entry, stop entry or stop loss are used to avoid intolerable losses.

Limit Entry Order

This strategy is used to enter the market for placing trade at most desired price or level. Limit entry orders are placed at specified price or even better. In this strategy, a trader either buys a currency below the market or sells it above the market. This type of strategy is applied in an anticipation of reversal in price hike after reaching your desired level.

Stop-Entry Order

This strategy works in reverse of limit entry order where an order is placed to sell below the market or buy above the market at reaching certain price.

Stop Loss Order

As the name indicates, this strategy is used to stop further loss after reaching at certain level. If prevents further loss if prices fluctuate against your predictions or expectations. It works until canceled by the trader itself.

Stop loss order strategy is considered really useful particularly for those who can’t sit before computer to observe each and every fluctuation in currency prices.

Market Order

Market order involves buying or selling a currency pair at best possible current price. As the best price becomes available the investor places order via broker to buy or sell. Depending upon the current available price, investors decided to sell or buy certain currency pair.

So, after having a look at aforementioned forex trading strategies, if you think that you are also having potential to convert your investment into profit then go and have your share today by using these strategies timely and prudently.