Forex brokers rely on their training and experience to get clients, and then generate profits both for the clients and themselves. The profits generated for the client signifies a return of investment, and the profits realized by the broker is their commission for the trade. In order to do this, brokers are trained to utilize different investing strategies. This article will discuss 2 basic but reliable investment strategies forex brokers can utilize. More importantly, these strategies can be modified in order to create tactics that are both new and profitable.
For this article, the following indicators will be discussed:
- Exponential Moving Average (EMA): A kind of moving average that uses the latest data which allows a more accurate and relevant reading.
- Stochastic: Uses past market returns, historical data, etc. to measure probability of outcomes in order to predict the conditions that can create specific scenarios.
- Relative Strength Index (RSI): indicates momentum trading thru gains and losses in order to help determine whether or not a particular trade is average, overbought, or oversold.
The Simple Balanced System
This strategy does not call for any specific type of currency and time frame. It however requires the use of several specific indicators such as:
- 5 EMA
- 10 EMA
- Stochastic (14, 3, 3)
- RSI (14, 70, 30)
The rules of entry are simple, purchase when 5 EMA crosses 10 EMA and when stochastic lines go upward or heads north. Make sure Stochastic does not go to the overbought position which is 70 to 80.The Rules of Exit is also simple, when 5 EMA and 10 EMA crosses, or if RSI goes above 50, then it is time to exit the trade. The lesson learned for this type of strategy is proper reading and patience. Forex brokers need to time the entry and exit to coincide with specific indicators to allow for maximum trade. This can take awhile but the returns is almost always there.
This strategy does not require a particular currency but the timeframe for each trade is 1 trade day. The indicators you will need are:
- 5 EMA
- 12 EMA
- RSI 21
The entry rules are simple, purchase when 5 EMA crosses over and above 12 EMA and when the RSI is above 50 then sell (exit) when 5 EMA crosses below 12 EMA and RSI is below 50. The advantage of this type of trade is that Forex brokers can actually trade with minimal risks after a casual glance at the indicators. The reason behind its effectivity is thru the use of the EMA lag whereby you time your trade during the crossovers (above and below). The lesson for this type of strategy is the use of the deficiencies in a particular indicator as your entry and exit points.
Strategies and techniques rely heavily on the use of Forex indicators. This is the reason why forex brokers invest in technology to get the most up to date information the fastest way they can. Now, the best brokers use several indicators at once and never in isolation. This is because one or two indicators maybe susceptible to error or paint an incomplete picture of the trade.