Forex Trading Strategies | Forexlive

Forex Trading Strategies

In the trade of Change market, a trader must use a set of strategies to get ahead and avoid further losses. Here is the list of basic tactics that most traders use to make more profit in forex trading.

Two basic forms:

1. Long trade – traders would bet that the price of a currency pair would rise in the future, and they would profit.

2. Short trade – is the opposite of the long trade. It is a bet that the price of the currency pair would fall in the future.

Four basic types:

1. Scalp trade – In this strategy, as a trader, you have to hold your position for a short period of time, such as seconds or minutes, and the profit amounts you would get are limited in percentage points (pips). This trade is meant to be cumulative in the sense that a small profit created in each individual trade is added to a huge amount at the end of the day or your preferred time frame. Using this tactic, you have to rely on the predictability of price fluctuations, but this strategy cannot handle volatility. Therefore, you should limit your trades to the most liquid currency pairs and place your positioning during the busiest times of the day.

2. Day trades – these are short-term transactions in which your positions are carried and liquidated on the same day. The duration of using the day trade strategy can take up to several hours or at least a few minutes. If you want to be a day trader, you need to equip yourself with technical analysis skills and knowledge of important technical indicators to maximize profits. In comparison, day trade tactics also rely on gradual gains throughout the day, much like scalp trades.

3. Swing Trade – in this strategy, as a forex trader, you must hold your position for a period longer than a day or 24 hours. For example, you can limit your trading position for a few days or even a few weeks. The swing trade tactic is very useful during major government announcements or in times of economic turbulence. Since you would have a much longer time frame using this strategy, you are not required to watch the markets throughout the day. As a swing trader, you need to have a deeper understanding and always be aware of economic and political developments and their impact on currency movement, in addition to technical analysis.

4. Job swap – using this strategy, you need to hold your position in your chosen currency pair for a much longer period of time which could be months or even years. This type of trading tactic requires more fundamental analytical skills as it provides a reasoned basis for your trade.

Other Forex Trading Strategies:

Some traders use strategies based on the broader realm of technical analysis, such as breakout and moving average, to calibrate or fine-tune their commercial approach even more.

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