Analysis of various forex trading strategies

The objective for us in this article is to explain some of the common forex trading strategies known as basket strategy and martingale strategy. If these two strategies are properly used then they can help forex traders increase their investment returns.

Martingale Strategy

According to this strategy investors need to increase their investment with each loss they incur. The martingale strategy is based on one particular theorem which states that a forex trader will always win after a continuous series of losses. Forex market allows a trader to select whether he or she wants to use short or long trades and then continue with it during the trading period. After losing a trade the forex trader begins to double value of his or her trade based on martingale strategy which states that a win will definitely take place.

You should know that there are exponential outcomes of this strategy which we will try to explain with the help of an example where a person invests $16,000 through single mini lots and if martingale strategy is implemented in this context then the investment will get exhausted after a few trades. In addition to it, the martingale strategy is useful only when the chances of a win are about 0.5.

Basket Strategy

As per basket strategy different orders be placed with each order formed containing various currency pairs. The strategy is primarily used by those who have large amount of funds to invest such as hedge funds and institutional investors. In addition to large investors some small investors also make use of basket strategy to reduce forex trading risks. Additional benefit of basket strategy is that it helps a investor to properly manage his or her trades. Forex brokers make use of hedged currencies for creating these baskets.

What are Jumping Slots?

Jumping slots is a form of basket strategy where basket is created using two sets. Let us take an example which illustrates how it works; in jumping slots 2 sets are created having five currency pairs. The currency pairs are correlated in both the sets which make them totally hedged. Next thing which is done is trading one of the sets as long trades and the other as short trades using a demo account. After a few days the leading five slots are taken up by long trades and bottom five slots are occupied by short trades. But sometimes the situation could be totally different with short trades occupying the top slots.

The primary objective of using jumping slots is to monitor to see if any from the bottom five trades reach any top slot. If such movement occurs then the currency pair is taken up and traded using a live account in the direction it was moving. Generally the trade gets closed when the demo account moves back to lower half position in gain/loss table. If you want to use this method then it will be necessary to invest more time for determining its specific as well as compute ratio for win & loss.

Conclusion

To conclude we would say that there are various forex trading techniques available such as the ones we have discussed in the above sections. The only thing you will have to do is properly analyze how they work and use them correctly as per your requirements.

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