Types of TradingThursday, 3 August 2017 09:49
Forex is one of the most popular exchanges with participants from all around the world. In addition to the Forex technical tools, there are various trading strategies and methods. Forex trading can be divided into several types.
This kind of trading is also called intuitive because the main reference point is not the trading systems, but a trader's internal understanding of the market principles. This type of trading is used successfully by the experienced market participants. Trading strategies and technical tools are also used, but they rather serve as an addition to the individual trading tactics. A trader can act in opposition to the indications of the instruments, guided only by a personal experience.
Algorithmic trading follows the trading strategy regardless of the trader's opinion, news, or fundamental factors. If the strategy shows an opportunity to make a deal, then a trader makes it. With this trade option, the trader fully relies on the mathematical expectation: the chosen strategy is tested during one year first, without missing a single transaction, with or without a profit. Then the trader calculates the results and determines whether his strategy suits him. If so, then he continues to follow it further.
Not only can you test the strategy in a manual mode, but also with the help of many different calculators. These programs and tables contribute to calculating the drawdowns, yield, and the final mathematical expectation of the selected method.
Within this trading type, a trader may lose money, but he doesn't stop trading because otherwise there is a chance to waste a large-profit deal, which would cover losses many times.
Automatic trading involves a least trader's participation in the trading process. In this case, all the main work is performed by the robots, called Expert Advisors. It should be noted that all the robots differ in their efficiency, algorithms, and strategies used.
Unlike the human being, the robot knows no fears, stresses, it quickly responds to the signals of the built-in indicators. At the same time, it's impossible to create a program that could perfectly adapt to the conditions of the Forex market, that change regularly. The use of robots is always associated with a high risk because the robot can behave unpredictably under the influence of the fundamental factors, get confused by the indications, and lose the deposit.
The most stable robots, as a rule, bring a relatively small profit, making deals only in the most favorable market conditions, which means a rare trade and low profitability.
Nevertheless, the Expert Advisors are very popular, especially among the beginners, since they relieve the trader of the need for long and detailed strategy researchers, as well as the manual analysis of the indicators, or the decision taking.
Experienced traders use robots as an additional tool. Most profitable is to use them as aggressive means, with a high-risk chance.
PAMM-services (Percent Allocation Money Management) is a earning on the Forex, without direct participation in the trading process. In this case, a person who wants to gain on the stock exchange entrusts his funds to a trader, who starts to trade himself. The profit is divided into terms of the contract. According to a contract, the investor can receive both the biggest part of the profit or the smallest one. The success of the PAMM-investing depends entirely on the trader's honesty and skills. There are a lot of participants who make contracts not looking for long-term cooperation, but merely for the sake of a one-time investment benefit, which can be supplemented by a successful transaction. In the case of losses, an unfair trader is not responsible for damages and keeps looking for a new investor, repeating this scheme and again.
This type of trading is similar to the PAMM, but in this case, you don't entrust your funds to another member of the exchange just copying the successful trader's transactions. These services work automatically. You choose the currency pairs, the number of operations per day, the lot amount, and then subscribe to the trade copies.
Depending on your experience and expectations, you can always find the kind of trading that would be perfect for you.