Best Forex Trading Strategies for Consistent Profits
- August 23, 2021
- Posted by: Daniel Richard
- Category: Forex Trading
It is not possible to trade in forex without any strategies because a perfect strategy can pave the way to make the best plan. You cannot realize the market sentiments if you have not chosen any trading strategy. So, the forex trading strategy is the essential thing for forex traders.
The most advantageous of having the trading strategy is that you can guess the future currency rate, and by relying on your suspect, you will trade for the best profits. In this article, you will get an idea about the five best strategies for forex trading.
Picking a Forex Strategy
The selection of a trading strategy is the most crucial thing, which will help profit from forex trading. So, absolutely, you have to first pick a forex strategy.
You should choose a forex trading strategy that is suitable for you, specifically for your personality and your lifestyle. Would you mind not following the others which strategies they select because they choose according to their convenience? It would be helpful if you select a competitively stress-free or risk-free strategy.
According to the performance of the strategy, you can decide to accept one or more strategies. So, for selecting the appropriate strategy, first, you have to check out the notable forex strategies. Therefore, check each strategy by back testing, and know about the past performance and popularity. If the background history of a strategy is good, you can select that.
If any strategy has access to the demo account, brokers will allow you to open without risk, and you can practice here. For the ultimate taste, you can start your trading with a live account if you think this is a profitable strategy.
It is the most important thing for beginners to start with a small trade because a small trade means a small risk. So, it would be best if you choose a strategy that has a small risk. After confirming a good performance of a particular strategy, then you can start the large trade.
Best Forex Trading Strategies
Different strategies exist in the trading market, but all categories may not be suitable for all traders. However, before selecting the best strategy, you have to think about your time management, personality type, specific situation, and risk management ability. If all these things are favorable for you for a particular strategy, you can choose this.
Scalping is a trading strategy in the forex market, which is a very short-term trading system. When a trader earns one to twenty pips within a few minutes for a particular trade, it is called scalping. If you make more than 20 pips, it is not named scalping because it will be a trade. The value of the currency rate is changing every moment. So, by observing the market situation, the experienced traders take this opportunity and profit quickly.
The scalper needs ultra-quality for catching the right trade because you may lose within a few seconds or minutes. Scalping may not be suitable for every forex trader because of its first speed and its stressful activity. So, without enough knowledge about this strategy, you should not try it.
It is a must for the scalper to monitor the price charts because if they observe the chart rightly, they will forecast the following price action. And according to their predictions, they will take a short-term trade for a small profit. To be a successful scalper, you have a high analyzing ability.
Like all other businesses, it is not out of risk; that’s why it is essential to have a risk management capacity. Though there is no exact time frame, some forex brokers impose a two minutes rule. If you close your trade before two minutes, brokers may remove your trade. So, be careful while using the scalping strategy.
- Day Trading
Day trading is also a forex trading strategy that is somewhat similar to scalping because both are short-term strategies. However, day trading follows a particular duration for trading. The day traders cannot take an overnight position; they have to close all their trades each day. So, when the traders are not active in the market, this helps the market by reducing issues to currency movements.
The technical analysis is helpful for the day trading strategy. Thus, most day traders use technical analysis for making the right decision. You may find many day trading methods exist in the trading market, and among these strategies, breakout trading is the most popular one. Thus, traders can trade by following a chart when the exchange value moves beyond a particular level in a currency pair.
If you have enough time to analyze the forex market from the beginning of the day and have the patience to monitor the trade across the day, you will be a successful day trader. As a day trader, it is mostly important for you to keep yourself updated on the latest economic news because it will help you make the appropriate plan. You have to close your trade at the end of the day, whether you win or lose.
- News Trading
News trading is another notable trading strategy for forex traders, which is not favorable for beginning traders. Traders who have a lot of money, enough patience, and the capacity to take risks can follow the news trading strategy. For the news trading strategy, traders can use both fundamental and technical analysis. Therefore, your trade can benefit from the volatility of the forex market after releasing essential news.
The forex traders who follow the news trading strategies need to monitor the economic calendar for knowing about the economic data release. Then, they should deeply observe the currency movement to identify the exact support and resistance levels to make the appropriate decision immediately. So, as a news trader, you need to follow the proper discipline for managing currency positions.
For instance, the news traders use the economic calendar and data release events of the U.S unemployment claims. During this Covid-19 lockdown, many people lost their jobs; for this reason, the news data was so volatile, and the forex market faced a very unstable situation after releasing this news data.
- Swing or Momentum Trading
Swing trading is a trading strategy in the forex market that follows a medium-term trading system. The swing trading strategy aims to capture the market moves, and when the market is correcting, the swing traders do this by trading with both the major trends and against them. So, as a swing trader, you have sufficient willingness to maintain the overnight positions.
Swing traders always want to concentrate on the existing position based on the momentum indicators, and these indicators provide buy and sell signals. Traders also use these indicators for identifying the overbought and oversold market. The swing traders can buy before the support level and sell before the resistance level, formulated on the chart.
For following the swing trading strategy, you must have enough patience because it is not a first trading system. It may take several times to close your trade. This trading system is more suitable for those who are not available for monitoring their chart in day time but have enough time to analyze the market overnight. A trader who uses the swing trading strategy can use both fundamental and technical analysis for determining the ups and downs of future currency value.
- Trend Trading
Trend trading is the most well-known trading strategy, that is a long-term trading strategy in the forex trading platform. It involves the movement of a particular currency pair. Sometimes, this strategy also includes buying on retreats in uptrends or selling in downtrends. In a trend trading strategy, traders use technical indicators for observing currency movements.
Sometimes, trend traders use trailing stop-loss orders. Anyway, after taking a position in a trend, you can hold on to it until the trading market reaches its goals. Trend traders can predict the future market sentiments by analyzing the current price movement and historical trends. Though it is a mid to long-term trading strategy, it can cover any timeframe.
Trend traders often use moving averages that can be long or short type moving averages that help them observe the price action.
There are three types of trends, such as uptrends, downtrends, and sideways trends. In a market, when the currency rate increases, it is called an uptrend. At the time of uptrend, traders take a long position. On the other hand, when the currency value decreases, it is called a downtrend. Traders take a short position in a downtrend. But, when the price indicates the middle point, it is the sideways trend. Almost all trend traders try to ignore this trend.
At the end of this article, it is clear that different strategies are suitable for different traders. Some like to trade day or overnight trading, and some like long-term or short-term trading. You have to choose the best forex trading strategy according to your convenience.