Currency trading is when you attempt to generate a profit by speculating on the value of one currency compared to another. Foreign currencies can be traded because the value of a currency will fluctuate, or its exchange rate value will change, when compared to other currencies. Online currency trading without a strategy is to rely entirely on chances for your success or failure. Making the right trading decisions and developing a sound and effective trading strategy is therefore the most important foundation of forex trading.

Extreme currency market volatility and major headlines has made forex (foreign exchange) trading more popular than ever, but the lightning-quick influx of new traders has been matched by a similarly dramatic outflow of existing traders. Market conditions remain as challenging as ever, and many novice forex speculators have found it very difficult to preserve capital - much less turn profits. One of the tools needed to overcome this difficulty is a good currency trading strategy.

Forex trading strategy is a set of rules and analyses that a forex trader uses to determine whether to buy or sell a currency pair at any given time. Forex trading strategies can be based on technical analysis charting tools or fundamental news-based events. The main task of any forex trading strategy is to minimize the impact of external factors on the forex trader and to organize trader’s activities. There are probably as many forex strategies as there are traders, but not all forex strategies are created equally.

Whether you are just starting out learning how to trade forex, or even if you have tried your luck a few times trading on the forex market, in order to achieve the important end goals you have set for yourself, you need to be realistic right from the start. It is also important to make sure you put the correct forex strategy in place to get you where you want to be. Placing a trade without a solid well thought forex trading strategy is like jumping out of a plane without a parachute.

The best way to be a successful forex trader is to study and get experience. There are many web sites with free articles, seminars, forums, which can help you in developing your own forex trading strategy. Simple logic and rational thought process will strengthen your strategy and earn huge profit from the trading. Forex trading strategies can be either manual or automated. A manual system involves a trader sitting at the computer screen, looking for signals and interpreting whether to buy or sell. An automated trading system involves the trader "teaching" the software what signals to look for and how to interpret them.