SUCCESSFUL FOREX TRADING STRATEGIES
SUCCESSFUL FOREX TRADING STRATEGIES
Learn about new Forex trading strategies to become better skilled at discovering excellent trading opportunities
There are numerous Forex trading strategies that might help you become successful as a Forex trader. However, with time, every successful Forex trader develops their own strategy, often combining several strategies into a system that works perfectly for them.
But as a starting Forex trader, you still have to learn about all the Forex trading strategies and understand all the pros and cons of each strategy so that you may discover for yourself what would work best for you.
Many market specialists agree that swing trading, day trading and scalping are the most often applied Forex trading strategies in the world. However, there are more successful Forex trading strategies available that can be applied as well. We will unfold some of these strategies for you.
Position trading
Position trading is a simple Forex trading strategy that involves holding your trading position for a longer period – from weeks to years. This type of Forex trading strategy does require knowledge of macroeconomics in order successfully implement it.
Position traders don’t get nervous about pullbacks or price fluctuations, as the major trend has already been foreseen by the research. With position trading, it is, however, very important to set clear stop out levels to minimize your losses.
The greatest benefit of the position trading strategy is that is does not require a lot of trading activity to be involved with a certain trading position. On the other hand, it does require considerable knowledge of the market in order to foresee a trend.
Grid trading
Grid trading is a type of breakout trading technique. A grid trader wants to benefit from new trends that are just beginning to shape. They will create a ‘grid’ of stop orders above and below the current price level. This so-called ‘grid of trades’ guarantees that you will win no matter what direction the price actually moves.
The great advantage of grid trading is that you do not need to research the market to determine the direction it will actually go in. Additionally, you don’t need to be monitoring developments all the time. On the other hand, there are increased costs to having numerous open positions that you will have to take on as a grid trader. To minimize these costs, you will need to close all orders the minute the trend goes in the opposite direction.
Range trading
In a ranging market, prices tend to move in a sideways pattern; therefore, range trading is typically based on grasping the support and resistance levels. You clearly define the price range of a trade before it reverses and moves in the opposite direction.
Range traders typically use banded momentum indicators to identify the overbought and oversold conditions of a trade.
The main benefit of range trading is that you can capitalize on current trends without needing to predict the market. On the other hand, timing is essential, so following the trend can be quite intense.
Retracement trading
When Forex traders talk about retracement, they are referring to the short price reversion direction within a dominant trend. A retracement trader uses technical analysis, such as Fibonacci retracements, to identify retracements over actual reversals.
These retracement traders know that they must hold their position as the dominant trend will most likely continue. When they realize that the retracement is actually the beginning of a reversal, they will leave their positions.
Retracement trading can help you decide when you have to enter or exit a position. However, it is important that you use several technical indicators like moving averages, candlestick patterns and momentum oscillators to confirm the trend.
Trend trading
Trend trading can be a highly reliable Forex trading strategy that is simple to implement as well. With this Forex trading strategy, you trade in the exact same direction as the current price trend. The only thing you have to figure out is how strong a trend actually is.
You can do so by identifying the exact direction of the trend and its duration. You don’t have to deeply analyse when the market will reverse. Instead, you can easily define a stop out level, or how much variation of the opposite trend you are going to accept. This way, you can benefit from current trends and limit your loss.
The major benefit of this Forex trading strategy is that you do not need to understand what is going to be next, and it is rather easy to implement. On the downside, you need patience as this Forex trading strategy works more for medium- to long-period trades.
News trading
The price of currency pairs is primarily influenced by macroeconomic events. That is why it is so important to follow economic news – to discover the potential impact on currency rates. This way, a new trader can anticipate macroeconomic movements.
Major macroeconomic events that influence currency rates are interest rate decisions by national banks, national economic reports like inflation, trade balances and unemployment rates, and confidence surveys that are often published by banks.
Macroeconomic developments do not always move in the same speed as you might expect, which is why a day trader must choose their momentum very carefully. On the other hand, when you are an expert in reading macroeconomic developments, you can almost predict price developments with certainty.
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