Forex trading strategies are essential for a trader. A trader should know when to be Bullish or to be Bearish. Forex trading strategies help you analyze the market and to take the last step of your analysis – to buy or sell a contract. This is the most complicated part of the whole process. Determining the time of the opening and closing of positions should be as accurate as possible.
The decision often must be taken within a few minutes or hours, using various tools of technical analysis.
Main Forex trading strategies are:
- Scanning the resistance and support
Sound Forex trading strategies, similar to this one, remain profitable, even though they started to rise long ago. When Resistance is broken, it can serve as a good sign to buy. This new position can be secure with the aid of a stop-loss placed directly below the level of a break. The level of a break now will become a level of support. New positions can also be opened, when in a descending trend the prices rise up to the Resistance line. New positions can also be opened, when in an uptrend the prices fall to the Support line.
- Prices crossing the trend lines
Looking for the price to cross the trend line is yet another one of common Forex trading strategies. Prices crossing the lines of the trend allow a trader to enter the market or to exit the market early enough, especially when the crossing has occurred on a proven trend-line. However, do not forget the other indicators of technical analysis. When using the trend line as the level of Support and Resistance, long positions (Buy) should be opened in the fall of prices to the level of an upward trend, and short positions (Sell) should be opened with the rise in prices to the level of a descending trend-line.
- Trading in the break
Forex trading strategies, based on breaks, include three main options:
– Open a position in advance, in the anticipation of a break;
– Manage to enter the market at the moment of the break;
– Open a position at the very moment of a break;
Forex trading strategies, in this case, can include a combined approach – a trader can open one position in each of the three phases. You can open a small position before the break, then buy another position immediately after the break and, finally, open an additional position at the time of a small fall in prices during the correction, following the break.
- Trading with positions of various time frames
1). Forex trading strategies, based on long positions, i.e., ranging from several days to several months. It is best to use this tactic in the presence of strong trends. At the same time, analyze short-term scales. Be sure to use in addition to technical analysis also the fundamental analysis, which is ideally suited for long timescales.
2). Medium-term trends, up to several days. Medium-term positions are more stable for profit, although the analysis for the decision-making is more complicated in this case. It is also very important to choose the right time of opening and closing positions. When you open medium-term positions, be sure to not only use technical analysis but also fundamental. This is one of the safest Forex trading strategies.
3). Forex trading strategies, based on short positions, i.e., ranging from several minutes to several hours. Fundamental analysis is, in fact, useless in this case, so you can fully concentrate on the technical analysis. The price will not change unexpectedly in your absence because you’ll constantly be following it. However, the risk of losses is very high, making short-term positions more suited to professional traders, and not for beginners. Another drawback is that you’ll have to have focused on the prices throughout the whole day. Try also to use the volume indicators, which will help more accurately determine the direction of the market. Also, this type of position is suitable for trade in breaks and rollbacks. These positions are not very suitable for the novice trader; a novice trader is better to stay with medium-term trends.
- Analyzing technical data
Most Forex dealers deem technical analysis buying and selling strategies as the best there is. The concept of this strategy is that there is a pattern that prices correctly follow. Thus, investors can utilize the trends and the movements of the industry in the past so that they can predict when to sell or buy specific stocks. Although this strategy isn’t necessarily error-free, it is the most efficient system for forecasting future financial trends.
Sound Forex trading strategies will aid you in finding the best times for your transactions. Sound Forex trading strategies remain useful for decades.