From forex trading to mostly any successful business worldwide, everyone would agree that success can’t be reached without a winning strategy. For making that desired profit from forex trading it’s a must to trade accordingly to a strategy, even if it’s your own created strategy. The rules and guidelines are what keeps your trades on the winning side.
Firstly a forex trading strategy that is practiced by the forex community is scalping. This strategy is very popular amongst beginner traders as it has a very low risk, although many professional traders also use this method. Scalping is when a trader makes a small profit on a trade but has a number of trades open.
As soon as a price spike happens he will enter the trade and right after the spike he will exit with the profit made. With from 10 to a hundred trades a day, all the small amount of profit adds up to a decent amount of money made.
The second strategy to look at is the Fibonacci Trading Strategy. This famous and popular strategy is ideal for medium to long-term trades, and for traders who use support and resistance levels. This strategy goes hand in hand with a trending market. When a currency pair is on a strong upwards trend direction, draw a trend line from the swing low point to the swing high point.
As the price drops, if it touches the supporting trend line twice, but it doesn’t break the line then a confirmed continue in trend is visible. A trader would then go long and buy until profit has been made or the price drops below the supporting trend line.
Swing Trading Strategy
A great majority of forex traders only trade in their spare time, and because of this, the Swing Trading Strategy was made quite popular. This is because take profits and stop losses play a big part when it comes to swing trading. This method is all about trading major currency pairs such as EUR/USD or USD/GBP during times when the market is volatile. You wait for the volatile market to break support or resistance then you place your stop loss and take profit accordingly.
The take profit will be below your support or above your resistance once they’ve been broken twice. This will allow the price spike to close at your take profit, resulting in you making money. The stop losses are there just in case the trend continues to go in the opposite direction. This method doesn’t require you to be monitoring your trade constantly, and it also eliminates emotional trading.
A strategy that has its own indicator to assist the trader is the Stochastic Trading method. This strategy is ideal to use with other indicators as traders use the stochastic indicator to confirm market entry. The trader would monitor the market direction and wait for the trend to be moving strongly in a certain direction.
Using the stochastics indicator, you wait for the indicator to be at opposite extremes. Once this guideline has been met you then look for an appropriate candle pattern that signals a reversal after a short retracement to the 20 Ema part of the indicator. This will confirm market entry.
Trend Trading Strategy
The fifth strategy to look at is also the most common and profitable one, Trend Trading. This strategy might seem to be the easiest one to use, however, most traders avoid trading solely according to trend. The reason behind this is because the trend can change with in a second. So how do you profit from trend trading, the best way is not to enter the market during a trend but to wait for the trend to change. One sign that traders look for is the 3 candle stick pull back.
When 3 candlesticks have pulled back in the opposite direction of the trend the trader then waits for the price to break support or resistance, showing a strong possible change in trend. Professional traders agree that trending trading is done after a current trend. This strategy requires a lot of attention and monitoring so part-time traders usually avoid this method.