The forex market never sleeps, so forex traders are always hard at work devising new strategies to increase their returns. There are a number of different strategies you can try. In this article, we are going to look at the top ones.
Remember that it pays to be disciplined, so if you try a new strategy, record everything you do in your trading diary. That way you can monitor the results and gain useful insights into whether the strategy is successful (or not).
Technical Analysis
Technical analysis is popular with forex traders. It’s all about extracting useful information from the wealth of available data. Traders use technical tools provided by forex trading platforms to work out whether currency prices are likely to move up or down. Use statistics, charts and volatility tools to forecast trends. Check historical data and see if you can spot any patterns. This is useful for predicting future trends.
New forex traders can learn more about technical analysis FX trading strategies in the easyMarkets Learning Center.
Fundamental Analysis
A fundamental analysis strategy involves looking at key economic factors such as unemployment rates and trade figures to determine whether a currency is under or overvalued. Use an economic calendar to bookmark when important economic data announcements are due. Watch the financial news and use this data to predict currency trends.
Trend Trading
Trends are useful indicators of which way a currency will move. Forex traders use trends to work out when to set their entry and exit points. Technical analysis tools are used to predict trends. Examples include moving averages and directional indices.
Swing Trading
Swing traders aim to profit from short-term price movements. This is not the strategy for you if you want to leave your desk all day. Swing traders typically monitor their positions every hour or less.
Scalping
Scalping is a step-up from swing traders. They only hold trades for a few minutes at a time, skimming very small profits with each trade they make. If you want to try this trading strategy, look for a trading platform that provides technical indicators for scalping, such as tick charts.
Day Trading
Day traders open a position in the morning and exit at the end of the day. This trading strategy is ideal for beginners, as you don’t need to continually monitor your positions. It’s a relatively safe strategy because you won’t be wiped out by large price movements overnight.
Position Trading
Position traders hold long-term positions, typically several weeks or months. These guys focus on long-term macroeconomic trends, hoping to profit on significant price movements over a long period of time. This is a strategy often practiced by more experienced forex traders working for large financial institutions.
Use the trading strategy that best suits your needs to help you make smarter trading decisions. You may find that more than one offers useful data, so mix and match. Always practice your strategies on a demo account before you risk your trading capital.