Best Effective Forex Trading Strategies
With a trading volume of over $6 trillion, the foreign exchange market is one of the largest financial markets worldwide. It’s an interesting venture for anyone willing to take risks, but it has many pitfalls.
If you are new to this, you need to watch out for these mistakes and make sure you don’t make them in the future.
One of the most important things in forex trading is finding the right trading style. There are now many platforms like RoboMarkets, a multi-asset broker that offers business advice, 6 markets and over 12,000 trading instruments to help traders make the right investment. With the help of such a platform, you will be able to find the right strategy that matches your needs and aspirations.
But what is a trading strategy? A trading strategy can be defined as a set of rules that help the trader better understand the trade and determine when, where and how to handle a trade. Having a trading strategy will help a trader stay consistent and help understand their performance.
If you’re wondering which strategy will work for you, check out this guide and find the one that fits your trading style. You can use any of these strategies, modify them according to your experience and find the one that could be profitable.
Price action trading
In this strategy, instead of considering technical indicators like RDI or MACD, the trader considers price movements. Here, technical indicators are only used as a support tool, and simple indicators like moving averages are more important.
Price action trading is especially useful for beginners as the charts will stay clean without multiple indicators thus avoiding confusion. Reading price action can also provide in-depth insight into the market, which will help you better identify patterns.
News Trading Strategy
In this strategy, a trader tries to take advantage of the market movie which is influenced by major news updates. To successfully use this strategy, a trader must know the financial market and know how it works.
Also, it is highly volatile as the trader tries to predict future news announcements and the market response based on those responses. Due to their volatile nature, they are best for trading oil and other volatile markets.
One of the biggest drawbacks of this strategy is that to be successful with this method, traders need to know how certain news releases will affect the financial market and should also be able to predict the market’s response to announcements.
End of day trading strategy
This trading strategy is implemented when the market is going to close. Traders at the end of the day should have a good understanding of the price action compared to the previous day. Based on their observation and prior knowledge, they can then predict price movements.
Setting a limit order and taking profit orders are usually followed by end-of-day traders to avoid risk. Compared to other trading strategies, end-of-day trading requires less time commitment.
Swing trading strategy
It is a trading strategy that requires market analysis, study of charts and individual movements. In the Swing trading strategy, traders buy a security when they sense the market is going to go up and sell the asset when they suspect the market is going to go down.
A successful swing trader will be able to identify the length and duration of each swing. They will also be able to identify the increasing or decreasing level of market demand. Although you need to do research to understand the movement of the market, the swing trading strategy is best suited for people with limited time.
Day trading strategy
Day trading is suitable for people who are actively involved in trading as a full-time profession. It is based on the price fluctuation between the opening and closing of the market. To avoid the possibility of overnight volatility, they hold many positions during the day but do not leave the position open overnight.
One of the advantages of day trading is that it offers flexibility. A day trader can hold up to 5 positions and close them all whenever he wants. Also, since there is no need to leave a trade open overnight, there is little risk of overnight risk.
They also offer multiple trading opportunities as a day trader can use both local and international markets and hold many positions. But to be a successful day trader, you need to be disciplined and have a clear, predetermined plan.
Trend Trading Strategy
In Trend trading strategies, traders use technical analysis to understand a trend. They won’t have a fixed view of where the market is going, but they will stay alert and then follow the trend.
Trend traders need to have a good understanding of trends, but at the same time it is important to stay alert and adapt to new changes. They may use a variety of tools to determine stocks, currencies, and commodities, as it can be very difficult to understand trends.
They will need to stay alert and identify when their system is outdated. The advantage of trend trading is that once they identify the trend, it is quite easy and requires very little time investment. Also, they offer many options for entering and exiting a trade.
So, identify the strategy that suits your needs and get the most out of your trade.