People have long been asking us about what the best forex trading strategies are and how they can work. People often figure there’s a magical solution that will help them earn the most money every time.
But the truth is that there are many forex trading strategies out there for you to explore. You can’t assume one strategy is going to be perfect every single time you complete a trade.
But the good news is that you can use one of many strategies when trading on the forex market today. This guide will help you explore some of the best trading solutions on the market. You’ll find six useful methods to consider for trading to help you make more out of your work.
You can apply various strategies to your forex trading work, but you might still struggle to be successful in your work. But by reading this guide, you’ll find details on strategies that can help you be successful. You can use one or more of these strategies to succeed in forex trading, keeping you from being stuck trying to find a solution that works.
We’ve been helping traders understand how the forex market works for nearly twenty years. We recognize the ins and outs of the field, and we feel the solutions we have to offer here will help you go forward with your work.
What Type of Trader Are You?
You could be an aggressive trader, or you might be a more conservative one. Perhaps you’re in between the two extremes, but you might also lean towards one side of the spectrum.
Whatever the case, there’s no right or wrong answer as to whether you should be an aggressive or conservative trader. You can succeed in your trading work if you look well at what happens in the field and find a solution that works for you.
Take a look at this scenario if you’re looking to see if you’re an aggressive or conservative trader. Let’s say that you have $10,000 in your account. You might be a conservative trader if you are willing to spend 1% of your account on a trade. You’re spending $100 here, which isn’t much. But you’ll be an aggressive trader if you go after something higher in value.
Meanwhile, you might lose five straight trades, with each being worth 3% of your account at the start. You’ll have lost $1,500 of your $10,000 at this point. You’ll be an aggressive trader if you risk 15% of your account on your next trade. You could also stick with a conservative approach where you continue to risk 3% of your balance on your next trade.
Some people will try to stay somewhere in between, although their plans would vary surrounding each trade. A trader might consider sticking with something a little more valuable that shouldn’t have much of a risk, for example. But that person could also invest more in a currency if that person feels there’s a greater chance for success.
Is It Important to Know Whether You Are Conservative or Aggressive?
Your nature for trading will dictate which of the six forex trading strategies you should use. An aggressive trader will want to earn as much money as possible without waiting too long, but that person will need to complete more high-risk trades. That person could also consider completing more trades through the same aggressive approach. While those smaller trades aren’t always worth as much money as the more massive ones, the quantity of those trades could make it easier for someone to make big bucks on the market.
While these two efforts could be ideal to some people, it could be tough for someone to succeed. An unlucky trader will lose a substantial amount of capital if one keeps on losing. The small-trade solution may also be useful, but it takes lots of effort to go somewhere with one’s profits.
The good news is that you’ve got a third option for trading. Instead of going after high-risk trades or managing a massive load of trades, you can look for options that have a more negligible risk to reward ratio. A trade like this will feature a smaller risk total, but it produces greater profits when you are successful in your work.
When Should You Trade?
Another way to look at how you should trade involves reviewing when you plan on trading on the market. There are five archetypes to consider when looking at when someone will deal on the market. Some people might fit in multiple archetypes, but you’d have to look well at what you’re entering when finding an investment plan you will appreciate:
- After hours – You could trade during the evening hours after seven at night to see what positions you should take.
- Morning or night – You might also plan your trades in the morning before heading to work. You can schedule your trades based on what the charts show in the morning. There’s also the option to review the charts at night before going to sleep to figure out what works and what you should execute during the day.
- Mobile alerts – Planning your trades in the morning always helps, but it helps to get mobile alerts if possible. One archetype to follow involves getting alerts on a mobile device surrounding whatever trades you complete in the morning. You can execute a trade on your device if you’re available. The note helps you figure out when you should get something going on the market, whether it is to buy or sell.
- Regular chart reviews – Some traders will check the forex charts throughout the day. They’ll look for the best setups for where they can enter a position, plus they can find different times to get out of something.
- Long-term reviews – Other traders will look at the charts once a week or even every couple of weeks. They will focus on long-term trades that take longer to manage. They can plan their trades based on what they feel will happen with the market after a while without dwelling upon whatever might occur throughout the day.
How Long Should You Hold a Trade?
Another consideration for figuring out a forex trading strategy is to look at how long you’re going to hold your trades. There are multiple methods you can use for holding a trade:
A short-term trade entails completing the deal as soon as possible. It can entail scalping, or it could involve aggressive trading efforts that include vast trade volumes. Swing trading and ranging trading are among the most common trading strategies you could explore in this field.
You could hold a trade for about one to seven days if you wish to follow a medium-level term. A medium-term trade can include a top-down transaction or a breakout trade. You could look for multiple confirmations when finding a suitable trade as well.
Some trades could last for weeks or months at a time. You could buy a currency pair and hold it for a while. You can use this if you notice a long-term trend in a currency that will stick around for the next few weeks or months.
Hybrid trades are somewhere in between the medium and long-term levels. You could hold a trade for weeks or months, but it could also last for a few days depending on the situation at hand. Proper analysis and monitoring would be necessary to help you see how your trades are working.
Combination trades are between short and medium-term trades. You can scalp pairs, or you could use a medium-term trade for higher possible profits. You can review the fluidity of each trading option to find something that works and gives you the best chance to succeed.
Choosing the Right Trading Strategy For Your Needs
We’ve found that it’s often easy for people to make money on the forex market when they know what to expect from different strategies. You can choose one of many strategies today:
- Easy Strategies – Top-down approach or position trading
- Medium-Level Strategies – Breakouts and trends
- Harder Options – Swing trades, scalping, and range trading
The easier options provide the smallest rewards, but they also have the least significant risks. A harder choice can feature a greater payout, but you will not be as likely to succeed unless you understand where you’re going in the field.
Whatever you choose, you must ensure whatever you pick is sensible and easy to follow. Here’s a look at the six best strategies you can follow.
The position trading forex strategy is an easy choice that works for newcomers. Position trading is similar to stock trading, as you’re holding the position for as long as necessary. You’re buying a forex pair at a low price, eventually selling it when you make a profit. You’ll hold it until it rises above the level where you bought it, ensuring you’ll make the most out of your work.
Position trading can work without much technical analysis. Sometimes a trader might use one’s instincts to find the best positions.
But the work should also involve research surrounding a position. The investor should look at what’s happening with a pair and figure out the potential to rise in value. For example, you might notice a pair at $100 that was at $400 at one point in the past. You could acquire that pair at $100 with the belief that it will get back to that $400 threshold, giving you a massive profit. It can take a while for the value to go up, but there’s always a potential for a profit.
The position trading strategy is easy because the stop loss for that trade is at 0. The price will likely never get to below 0. The losses you earn are temporary, plus you can predict the potential losses that might occur before you execute your trade.Position holding requires patience, but it can work if you plan your trades well. For example, you could acquire a forex pair at $15 and then exit at $30 to get twice the return. But if that $15 pair goes to $60, you could exit at that point and get four times the return.
Swing trading is a hard option, as it entails looking at the potential swings that a forex pair will experience. You will require many indicators and charts to help you find when you should complete a swing trade. You can use an RSI forex indicator, MACD histogram, Bollinger bands analysis, or stochastic indicator to help you figure what fits best when completing your trades.
The ways how these indicators work will vary over whatever you notice with a pair. For example, a stochastic indicator will show all the highs and lows on the market. It also lists when the forex pair gets to the oversold and overbought levels. You could also use a trendline indicator to show how the value of something is moving up or down over a few trading periods.
The challenge of swing trading is that it’s tough to figure when the price for something is higher or lower than it should be. You could figure that the price for something has reached its peak, but the currency will keep on rising in value. The same could happen in the opposite direction.
But many swing trades can include safety triggers that list when trends are changing. You can use this detail to make a decision when you’re about to enter a trade, especially when you’re not certain about whatever might happen when you complete your moves.
Range trading is a little tougher than most other solutions. It entails a short or medium-level time for holding the currency. Range trading works with the trading finding the two levels that support price movements. One level is at the top, and the other is at the bottom.
The prices can keep moving between these two range thresholds the trader produces. But eventually, the value will break out and go above or below the range in question.
The trader will find the extremes for the range and plan trades around that point. As a currency pair reaches a rejection point where it doesn’t go beyond the set range, the trader can buy or sell the currency.
Range trading is very popular among scalpers. Scalping entails a trader completing multiple trades on the same pair, with each trade lasting a few minutes on average. The scalper buys at the lows and sells at the highs, repeating as often as possible. The person repeats until the price breaks out from the resistance levels and its said range.
Sometimes range trading can entail getting in the middle of a current movement. This strategy is more common among scalpers. The trader can buy when the price moves to the middle of the range. The person will take a profit near the upper rejection area. After that, the person can sell when the price goes past the middle section, thus taking a profit around the lower rejection spot.
Yet another scalping option in range trading entails placing a buy-and-sell position midway through the range. The scalper will close a sell trade when the price drops to make a profit. But when the price rises again, the person closes the buy trade around a breakeven point. The effort ensures the sale provides a gain, while the buy will entail a minor loss. The trader makes a profit in general. The same can also work the other way around, with the person closing the buy trade when it rises and then closing the sell trade when the price drops again.
Range trading can be exciting, as the ranges for a currency pair can last as long or short as possible. Sometimes a range could be a few minutes, while it could take takes in other cases. Be aware of how quickly you can respond to changes in the market before entering a range trading position. Be sure whatever trade you complete is also easy for you to manage and that you understand where you’re going with your work.
Breakout trading is another strategy that uses a medium-level holding period. Forex breakout trading involves cases where a currency’s value bursts out from a range after a while.
For a breakout trade, the currency will stick within a range before breaking out. The break that occurs will often start a possible trend in the currency.
You could trade a breakout by using a pending order that goes above the breakout level. The pending order will list the start of the breakout, giving you the potential to get in on the deal.
You could also wait for a close to happen above the support or resistance level before you start your trade. The option you have here can influence where you’ll get with your trade and how you can make it work.
There’s also the choice to wait for the price to retrace before you get into a position. The price can still go back to the support or resistance level after a breakout happens. Waiting might be easier to manage, although you’d have to note where the trade is going when seeing how this change might happen and where it will go from there.
It’s often tough to predict where a breakout will go, as the forex market is always experiencing change. You can study the forex charts to see where a currency is going and to figure out what might happen next. You can also look at prior breakouts to see what results happened in these cases. You can review breakouts as close to one another as possible for the best returns. Remember that there’s always a potential for a false break to appear in a trade.
All traders have different attitudes for how they will enter forex trades. Watch for how the market moves and look at what you might notice when getting into a breakout. It might be easier for you to succeed if you watch with care.
Sometimes sticking with a trend is the best way to trade a currency. Trend trading entails going in on a notable trend within a pair. You can use one of many efforts in this process:
- Price action – Price action trading entails looking at the candle or bar on a trade. You could choose to buy or sell the currency based on how much of a shift you notice, especially if one bar appears bearish or bullish.
- Retracement – A retracement process involves reviewing how the value of a currency is going in one direction before moving back to its long-term trend. You may notice cases where a pair rises in value over time before it can eventually drop.
- Fibonacci – The Fibonacci trend trading strategy helps you find a possible retracement in a pair. The Fibonacci process involves the 50% and 61.8% thresholds. You can look at how far a currency moves towards one end before dictating whether you should buy or sell a pair.
All trend tradition efforts come with different features that might be beneficial for your use. Be certain when trading that you notice where the trends are going and that they’re heading where you can predict what will happen next.
The top down approach to trading is the last one to review. A top down process entails looking at many timeframes when seeing what currencies you should trade. You can find a suitable trade at a higher timeframe and then hold the trade, executing at a lower time frame for a greater profit.
You can check a timeframe to see how high or low the value of something shifts. The goal will be to look for many timeframes where the value keeps moving in one direction, helping you make a smarter decision when seeing what trade plan you should follow.
The stop loss will be in the lower time where the price is lower. The profit comes from a higher time as the price goes in the opposite direction. The process gives you the best possible chance at a high-value return.
We’ve found that every forex trader will have a different strategy that fits one’s needs. The market is filled with many opportunities for success, but the best traders will always be the ones who trade based on what they know works for them.
Look at your strategy plans when entering the forex market, and be ready to see what might happen. You’ll find it easy for you to succeed when you look at what works and how you can plan a suitable effort for work.
You can also use multiple strategies if you prefer. Every currency pair is different, giving you an option to stick with different strategies surrounding whatever you feel is more likely to succeed and give you the best profits. Look at how you’re going to trade when figuring out what will work the most with a good trading plan.
Let us know what forex trading strategies will work well for your needs. We love hearing from investors about what they find the most successful for their trading plans. We feel you’ll find a solution for work that will fit whatever trading interests you have the most.