Complete Guide to Forex Trading Strategies

Forex trading is all about doing away with the bad trades and making some profitable ones. This is done in large part due to proven Forex trading strategies. Using these strategies, a trader develops a set of rules for himself which help to take advantage of Forex trading.

A Forex trading strategy will help an investor determine whether to purchase or sell a pair of currencies.

Many Forex trading strategies abound, each involving various degrees of fundamental and technical analysis. And there will always be various theories about how much to trade, how frequently, how long to maintain a position and when to enter or leave the market.

Although none of these Forex trading strategies is guaranteed to work all the time, traders can find it helpful to become acquainted with a variety of strategies to develop an array of resources to respond to changing market conditions.

In this guide, you will find a long list of major strategies formulated and used by various traders. You’ll also get to know how to pick and develop your own approaches, and why you should maintain a successful strategy for long-term success in the business of Forex trading.

What Are Forex Trading Strategies ?

A Forex trading strategy, or a trading system, as some traders are accustomed to calling it, is a blend of technical and fundamental ways of evaluating and analysing the Forex market in order to take profitable positions. Basically, a Forex trading strategy contains when to enter and exit the market.

Forex traders have the option to build their own strategy or visit one of the several Forex websites online and either purchase one for a fixed price or take a monthly subscription. There’s always the chance to get one for free online.

Why Do You Need a Forex Trading Strategy ?

Initiating a trade without a good, well-thought-out Forex trading strategy is like embarking on a journey without a direction. Below are reasons why Forex trading strategies are important and crucial to success in the business:

  1. A strategy enables you to measure and improve your performance.

Trading arbitrarily without a specific trading strategy leaves little ability to measure your results because there is no consistent basis for evaluation for you.

Using a trading system over an extended period helps you to create a predictive framework that can help you gauge its performance and once the assessment is complete, you will start working on improving it.

You will be able to see whether the improvement to your strategy was successful or not by changing the criteria and comparing the latest findings to the historical data.

  1. A Forex trading strategy helps you to stay focused, confident, and disciplined

Every day countless traders trade in the Forex market, but many of them struggle and fail repeatedly. An unskilled Forex trader speculates arbitrarily, and the speculation is not based on analysis or hard data.

Whereas a smart trader speculates on price changes dependent on historical data and scientific instruments and indicators. A smart trader always chooses a path of successful Forex strategies that he builds after testing out a variety of strategies as he trades and picks the best.

  1. A strategy provides you with a game-plan

If you want to be successful in Forex trading, you need to be able to prepare ahead. If you plan to dive headfirst into the FX market without any planning, there are very low chances that you will succeed. You need to know what you’re aiming for, what your goal is and how you’re going to accomplish your goals.

What Are the Different Types of Forex Trading Strategies ?

There are various types of trading strategies in forex. There are scalping, day trading, swing trading and position trading strategies.

They are as perfect for other traders as they are unreliable for certain traders. You will need to discover (or develop) an approach that works for you!

All strategies can be categories into different groups ranging from intra-minute to intraday, to the long-term analysis of price movements.

Traders can select a single strategy or combine several strategies. Whatever approach you decide to take, they can all help you to increase your potential for success in Forex trading. Here’s a rundown of the most common Forex trading strategies.

Breakout Trading Strategy

Breakout Trading Strategy

Breakout trading strategy is used by buyers to take a position in the early stages of a trend. Trading breakouts offer many advantages such as:

  1. Momentum serves you – breakouts trading causes you to enter the market with momentum behind you.
  2. Catch major trends – occasionally, major trends may never come if you were to trade pullbacks. But you never have to think about missing another trend in the markets with breakouts

Sometimes ranges and chart anomalies arise within broader trends. When it happens, you don’t have to wait for the breakout to carry out a trade. Breakout trading ensures you catch every trend – that’s why trend traders use it extensively.

Breakout trading is a perfect tactic, no matter what the timeframe. The principles are universal regardless of whether you are using intraday, daily, or weekly charts. This strategy can be extended to day trading, swing trading or other trading types.

Moving Average Crossover Strategy

The average of a given duration is known as a moving average. In this Forex trading approach, the emphasis is on basic moving averages; the aim is to help traders identify indicators for entering and exiting the market as well as levels of support and resistance.

The common use of moving averages by Forex traders is as a technical indicator, usually for a timeframe range of between ten and two hundred days.

What you need to do is plot a few moving averages, then watch out for a crossover. If the moving averages cross each other’s path, that’s a cue that the trend may soon shift, providing an opportunity to make a better market entry. You get a golden opportunity to earn more pips.

Moving Average Crossover Strategy

Carry Trade Strategy

A carry trade is when you borrow a low-interest-rate currency and use the capital to buy another currency that pays a higher interest rate. You make money on the interest-rate differential.

Finding a good pair to do a carry trade is relatively easy. Watch out for two things:

  1. Find an interest difference that’s high.
  2. Find a pair in an uptrend that favours the higher-yielding currency. This offers you the freedom to stay in as long as possible and benefit from the difference in interest rates.

As with any other trading strategy, use good risk management when making trades. It is enticing to reach out for the regular interest payment, but without any caution, it could cost you a lot in losses

Carry Trade Strategy

Price Action Trading Strategy

Price Action Trading Strategy

Simply put, price action is a trading strategy that helps an investor to read the market and make individual trading decisions based on the current and real price changes, rather than focusing exclusively on technical factors.

One of the key facets of learning how to deal with price action is to, first and foremost, know how to recognise a trending market vs a consolidating market.

Economic factors generate the movement of price in the market that is easily seen in the price chart. Therefore, instead of having to evaluate one million economic variables every day (which is clearly impractical, but many traders try), you should actually learn to trade in price action, as this trading method helps you to quickly interpret and make use of all market variables by simply reading and dealing from the price action. They usually leave a trail behind in a market place.

Day Trading Strategy

Day trading is essentially the name assigned to any form of Forex trade that is carried out on every particular day of the week, on which the trading ceases on the very same day.

Such traders tend to choose one side at the start of the day, act on their prejudice, and then finish the day with either a win or a loss.

They don’t want their markets being kept overnight. The main benefit of day trading is the fact that the money is just at risk for brief periods. And, if you make the wrong trading decision, you’ll learn it within a matter of hours, or the same day.

This provides you with the ability to free up your resources and use it for new trading strategies. Day trading is ideal for Forex traders who have ample time in the day to research, conduct and monitor a trade.

Scalping Strategy

Scalping Strategy

Scalping typically uses high leverage to allow a very short-term deal for a few pips. Usually, scalping is better performed in accordance with a news release and technical conditions to enable it.

Scalpers tend to take advantage of the relentless market actions by profiting from the small price fluctuations.

Generally, most traders use a time frame between 1 and 15 minutes to scalp currency pairs, but the time frame of 15 minutes doesn’t seem to be as common.

The most common scalping time ranges are both 1 minute and 5 minutes. Check them out to see for yourself which one fits better – if any.

To successfully scalp trade, you need to learn how to do two things:

  1. Find and place areas of support and resistance.
  2. Identify continuations on limited time intervals.

Scalping isn’t always an optimal technique for people with day jobs and other hobbies. Rather, more fitting are longer-term transactions with higher income expectations. Admittedly, scalping is a challenging technique to effectively implement. One of the main reasons for this is that it takes lots of trades over time.

Position Trading Strategy

Position Trading Strategy

Position trading strategy is a Forex investing method in which an investor is more interested in the price changes in the market in the long term.

This approach fits the profile of Forex trading who are patient and are grounded in the fundamentals that drive movement in the market. The biggest draw to this trading approach is that it does not demand much effort or time on the part of the trader.

Everything that is needed is initial research; once the trader determines how the asset will be exchanged, they enter the exchange, after which nothing else remains to do.

A Forex trader can risk 200 pips using position trading to theoretically deliver 1000, 2000 or 3000 pips utilising position trading.

Swing Trading Strategy

Swing Trading Strategy

Unlike day traders holding positions for less than a day, swing traders usually hold positions for several days, even for as long as a few weeks. Since positions are held over a period of time to catch short-term price moves, traders don’t need to sit during the day continuously watching the charts and their trades.

It should be remembered that when using a swing trading technique, it is the pacing of the position of trading that is the most critical part of this method of trading because you need to use a set of different methods to time the trades to the optimum.

Swing trading strategy is perfect for someone who can’t track their charts every day but can spend a few hours studying the market at night.

Range Trading Strategy

Range Trading Strategy

Range trading strategy is a Forex trading technique that includes finding overbought and oversold currencies (or areas of support and resistance), purchasing during periods of overbought/support, and selling during periods of overbought/resistance.

True range traders do not bother about direction. The fundamental premise of range trading is that it will most likely return to its place of origin no matter how the currency flies.

In reality, range traders bet on the likelihood that rates will trade several times around the same ranges and the aim of the traders is to reap such oscillations for benefit again and again.

The basic way of trading a range is entering (or exiting) trading ranges along the borders of the range. That means selling at the top of the scale and buying at the bottom. The top of the spectrum offers a price increase protection area and the bottom a market decline support zone.

Momentum Trading Strategy

A momentum trading strategy is a tactic in which a trader trades in the direction of the main market trend or currency pair. Momentum trading is also called trend following trading.

Momentum may be measured over longer stretches of weeks or months or within minutes or hours of day-trading time frames. The first step normally taken by traders is to decide the course of the trend they want to transact in.

There are a vast variety of momentum indices to pick from: the amazing oscillator or the intraday momentum index, for example, are also well known. Both of these work practically on the same concepts. The trend is coming to a close as prices are decreasing. When rates decline, costs decrease, and buyers step in unison to sustain a fall in prices.

Trend Reversal Trading Strategy

Trend reversal trading technique, to use a layman’s term, is a trade that reverses (either upwards or downwards) the direction in which a market has been going.

It capitalizes on favourable entrance into the market, opening up a spot at a lucrative price and pushing the momentum to earn, sell or purchase as the market is about to reverse.

During development, reversals can be difficult to recognise, but after they evolve, they are quickly recognisable. Markets often change course on intraday, regular, and weekly bases. A turnaround of the economy may happen unexpectedly within seconds, or it can take days or weeks to evolve slowly.

In using reversal trading, it is often a safe idea to wait for confirmation of the trend. One way of seeing if the price is reversing is to make use of pivot points.

In an uptrend and downtrend, traders are eyeing the lower points of support and higher points of resistance respectively. The lower support points are S1, S2, and S3 while the higher resistance points are R1, R2, and R3. When they find the points in each case, they wait for them to break.

Trend Reversal Trading Strategy

Pullback Trading Strategy

Pullback Trading Strategy

A pullback Forex trading strategy can also be called a retracement strategy. That literally means entering into a market with an already confirmed trend that the market has turned against as traditional markets do, creating an ebb and flow over time.

The advantage of trading pullbacks is that you buy low and sell high. If in an uptrend you trade pullbacks, you buy low. When in a downtrend you sell pullbacks, you are essentially selling high. One of the ways to benefit from pullbacks is firstly to assess whether or not the general pattern is a good one.

The higher the risk, the more likely it is that an investor would benefit from a pullback. In order to establish a pullback, we must first know where the normal trend is, and how the market responds in time at that moment.

In a strong bullish cycle, for example, the price will usually surge to a new peak, challenge the resistance and then decline as the momentum starts to decrease. A basic technique like this needs nothing more than a moving average and a filter for the Bollinger band.

Fibonacci Trading Strategy

Fibonacci Trading Strategy

Fibonacci trading strategies offer a way for traders to calculate price pullbacks within trending markets, identifying openings for trading in each event.

The Fibonacci series is a set of numbers in which each number is the sum of the two corresponding numbers between 0 and 1. This continues to infinity: 0, 1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, 233, 377, 610, 987, 1597, 2584, 4181 and 6765….

There are some interesting relationships between these numbers which form the basis for trading Fibonacci numbers.

Fibonacci retracement rates are considered a fundamental statistical predictor because they seek to discover where the price will be in the future.

Using Fibonacci retracements, Forex traders define where to position market entry orders, take gains and stop-loss orders.

The idea is that the market will retrace or return back to a former price point before resuming in the path of its rise. In using this method, the highest and lowest points you want to include on the chart need to be defined first.

Trend Trading Strategy

Trend Trading Strategy

Trend investing strategies are designed to help you spot trends as quickly as possible and leave the market before they return.

Both the opening price and closing price, plus each candle’s trading range, provide traders with a wealth of knowledge that can be used to define the trend’s ebb and flow. Traders using trend trading strategies use channel breakouts, moving average, and current measurement of market prices to determine market direction and produce signals.

Before you can determine which trend trading strategy to use for your Forex trading, you need to consider the sort of pattern you are in. When you don’t grasp the underlying pattern and market activity, then a reversal tactic is what you need to get in and win, you’ll be trying to ‘sell from interest’ in a pullback.

Every trader needs to learn how to assess a given trend and asset power. The Aroon Oscillator is one of the strongest trend indicators that can help you correctly determine how strong or weak a trend is.

News Trading Strategy

News Trading Strategy

No particular strategy exists to trade the news. The price continues to jump in one direction as news arrives, or has a subdued response to the results as markets absorb the outcome against investor expectations.

Follow this basic three-step method to implement the news trading strategy:

  1. You need to determine which Forex news events you want to trade on.
  2. What currency you will exchange on this specific Forex news case.
  3. Determine which direction the currency should move in.

Traders who can successfully handle the risks of uncertainty are well on their way to being reliable traders at the predetermined time of news release.

Retracement Trading Strategy

Retracement Trading Strategy

A retracement is described as a temporary price change against the existing trend. Another way to look at it is as an area of market change that is heading against the trend but returns to keep the trend running.

Retracements, while easy to equate with reversals, can, in reality, be a validation of a trend. They will help you find a good background for a great exchange – particularly if they are Fibonacci-level retracements.

Most traders at the outset of a cycle will wait until the retracement has happened before they enter a deal.

In general, Fibonacci retracements or extensions may be used by traders in an effort to find contradictions with certain primary rates, such as support/resistance, pivot points, and so on.

The objective behind the concept of blending two Fibonacci retracements is to find a minimum of two powerful levels of Fibonacci in a region where support or resistance could be possible. Traders are mindful that these confluences are likely to cause a response that they can use in making decisions about how to position themselves for profitable trades.

Grid Trading Strategy

Grid Trading Strategy

The Forex grid trading strategy is a technique which aims to benefit from the natural market movement by positioning buy-stop orders and selling stop orders.

This is achieved at a predefined market distance (called a leg), with a predetermined take-profit rate, and no stop-loss.

Buy stop entry orders are set above the existing market price in a grid-trading strategy. If a bullish breakout happens, such orders will immediately put you into a long position.

In case of a bearish breakout, sell stop entry orders are then put below the current market price to cause a short position. This method of trading is easily automated. That means you don’t need to be stuck to the phone all day long on your computer.

Another good thing is that even though the market is unpredictable, grid trading yields income. And, no matter where the price falls, the grid is able to pick up the gains from every direction of the demand shift, because, of course, you have correctly fine-tuned your system to work effectively.

You have to develop your own grid. How you design your grid will depend on your personal strategies and appetite for risk, but most grids are generally very similar.

Volatility Trading Strategy

Volatility Trading Strategy

Wondering how to catch a big market trend? Then you might want to use the volatility trading strategy.

Volatility is basically how currencies price swings within a given timeframe. And we can use the ATR (Average True Range) metric used at most trading sites to calculate it.

There are also two forms of volatility that need to be considered for a perfect calculation – historical volatility and the volatility implied.

Historical volatility has already existed, so implied volatility is a reflection of the hopes of traders for the future (based on futures prices). When the market gets frantic, the most rational thing to do is to expand the profit/stop-loss targets.

Often, it is best to use small stops when volatility is high and market activity is choppy.

Typically, this Forex trading strategy yields the greatest performance when applied to markets that are in a range.

Pivot Point Trading Strategy

Pivot Point Trading Strategy

Position trading strategy is a Forex investing method in which an investor is more interested in the price changes in the market in the long term.

This approach fits the profile of Forex trading who are patient and are grounded in the fundamentals that drive movement in the market. The biggest draw to this trading approach is that it does not demand much effort or time on the part of the trader.

Everything that is needed is initial research; once the trader determines how the asset will be exchanged, they enter the exchange, after which nothing else remains to do.

A Forex trader can risk 200 pips using position trading to theoretically deliver 1000, 2000 or 3000 pips utilising position trading.

The Bladerunner Trading Strategy

The Bladerunner Trading Strategy

The Bladerunner trading strategy is a Forex market strategy which uses pure price action. It needs candlesticks, turning points, support and resistance to use in trading.

The technique is dubbed the Bladerunner due to its ability to cut the price movement like a razor in two. No off-chart indicators like Stochastic, MACD, or Awesome Oscillator are required for this strategy.

Exponential moving average of 20-periods is the only metric that is necessary when deploying the Bladerunner strategy. Trading alerts are given when rates rise decisively above or below the EMA and then test the EMA more than once.

There are rules in place for this strategy’s bullish and bearish variants, and each of these phases will be followed before any real-time trades are brought in. Many methods for technical research use the moving averages in some way or fashion.

Yet when we look at the rules developed for the Blade Runner style, we can recognise alternate versions (and trading signals).

London Hammer Trading Strategy

London Hammer Trading Strategy

To put it simply, the London hammer trading strategy is named after the London Forex market and is directly linked to the time of volatility that typically accompanies the opening of the market. As a result, when trading begins at the London Forex exchange at 7:00 GMT or 8:00 GMT (depending on daylight savings time), it is faced with incredibly high volatility.

London’s Forex market sets the tone on what to expect on the market and how the market can flow. This trading system is relatively easy to use as it needs no indicators. The only thing that needs to be done is to monitor the chart to find the hammer candlestick below support/resistance thresholds.

Bolly Band Bounce Trading Strategy

Bolly Band Bounce Trading Strategy

Bolly Band Bounce strategy involves Bollinger bands being used. Such bands show the features of an elastic band and, therefore, the name. The outer bands sense price fluctuations that can very easily yield for short-term scalping.

The first thing you need to do when looking at trading this technique is to decide if the price is still within a reasonable range. The easiest approach is to test if the price remains on one side of the middle band or the other.

If so, and the market is continuously getting lower lows, then the trend is downward. If the price stays above the middle band and lows are steadily higher, then the market is in an uptrend.

Bollinger bands serve as a complex support/resistance point when trading using the Bolly Band Bounce trading strategy, from which the price is supposed to bounce back.

But traders consider the market movement convergence and the outer band to be both an entry point and an exit point.

Traders may use stop loss and take profit features for better outcomes. Then stop loss will be changed if the price takes a move in the right direction.

Renko Chart Trading Strategy

Renko Chart Trading Strategy

A Renko chart is a particular type of graph for showing a financial instrument’s price movements. The chart is made of blocks (a.k.a. bricks) of the same dimension. Such blocks may be bearish and bullish as in a regular bar or chart with a candlestick.

There are two shades of Renko charts – green (bullish) and red (bearish). A Renko chart is built by putting a brick in the next column until a predefined number reaches the top or bottom of the previous brick.

White bricks are used when the trend’s trajectory is up, while black bricks are used on a downward slope. This form of chart is highly useful in determining main support/resistance rates for traders.

If the trend path shifts, transaction signals are produced and the bricks alternate colours. Renko charts have an easy means of sticking with the pattern when the market is trending.

Do not leave before a reversal happens – a verified box of the opposite colour. Traders may use traditional technical analysis to help define possible tipping points or trend developments, and then use Renko charts to hold to the pattern, or a trader may simply trade based on Renko.

Candlesticks Trading Strategy

Candlesticks Trading Strategy

Candlesticks reflect the price and they display all data points at a glance. Candlestick trading strategies include deciding the timing of market entry based on high probability trends and handling the exchange according to the predetermined rules that adhere to your money management strategy.

Three different points build a candlestick: the open, the close and the wicks. If the selling price is above the open, the candle turns green/blue (the colour depends on the chart settings).

When the selling price is below the open the candle will turn red. If you like day trading and wary of indicators, then you’re the Japanese candlestick Forex trading strategy might be your way out.

Support and Resistance Trading Strategies

Support and Resistance Trading Strategies

Simply put, a support area is where an asset’s price continues to avoid dropping, while an opposition area is where the price tends to cease increasing.

It’s an easy way to analyse the chart to quickly establish this important information:

  1. Market direction
  2. Timing of market entry
  3. Establishing points to leave the market at a profit or loss.

If a trader is able to tackle the three issues above, then they effectively have an idea of how and when to trade. Identifying support and resistance levels on a chart will resolve these trader concerns.

Fractal Trading Strategy

Fractal (from the Latin word “fractus”) means a continuously scalable design of irregular shapes that emerges from any data.

In the Forex market, a fractal is the candle pattern created by at least 5 (or more) candles, max/min of which the main candle equals the neighbouring candles’ extremes.

Fractals appearance signals the beginning of a new price curve and is seen as a trading indicator. The fractal indicator works with any currency and any timeline. Therefore, traders should pick the chart intervals according to their particular trading strategies.

So far as the technique of reversal is more dangerous than a with-the-trend approach, it is worth evaluating the course of the major trend to track broader timeframes for analysis.

There’s an approach that implies opening only longs if, for example, the general trend is heading north and overlooking bearish fractals.

Dual Stochastic Trading Strategy

Dual Stochastic Trading Strategy

The dual stochastic trading strategy focuses on investing when there are extreme opposite values in the two indicators.

When all the fast and slow stochastics are at or below the defined limit values, a trading opportunity is signalled.

Traders are searching for a clear pattern when trading in line with the Double Stochastic approach. They then wait until the Stochastic measures are at opposite extremes (when one of them is in the overbought region, the other in the oversold position).

If this occurs, it can be predicted that the trajectory will start to shift in the direction observed before. Whenever the main line turns over the signal line in the quick stochastic oscillator, we reach the market with a buying role.

The escape point shows up as the traces of slow stochastic overlap. Before calling the exit point legitimate, you can wait for the candlestick to close.

How to Choose the Right Forex Trading Strategy

The simple fact is that there are no quick and easy rules to follow that will guarantee you choose the right trading strategy because it’s just a really personal matter. The best way to do so is to look at a particular strategy’s gains and losses. But there are other things, too.

To find the most suitable currency trading strategy for you, you need to weigh all facets of your trade: preferred tools and resources, consumer behaviour model, psychological component, time period, profit cost ratio, risk management, and so on.

A structured approach will help you pick the exact Forex trading strategy that will work for you and improve your Forex trading performance.

A trading strategy does not focus solely on the indicators. You have to realise that no experienced trader uses a single marketing Forex strategy. Rather, they incorporate various approaches and strategies which can be applied to specific situations.

Often, many practitioners move between swing and day trading to maximize the number of prospects that they can take advantage of.

Test Out Your Forex Trading Strategies on a Demo Account

Test your strategies on a demo account by playing with some of the above strategies. You can try and master important trading tricks and tactics on a demo account.

It’s a big benefit for newbie traders to exercise their strategies and tactics without the possibility of losing any real money.

Successful trading requires information and confidence – both of which can be improved in your own time using a demo account.

How Do You Set Up a Trading Strategy ?

  • Determine how much time and money you are willing to invest.
  • For your Forex trading strategy, pick an asset or asset type.
  • Choose a timeline.
  • Choose a method (indicator) you will use to identify trends in the market.
  • Determine the signal to make a market entry,
  • Also, determine the signal to make a market exit.
  • Establish guidelines pertaining to risk management.
  • Test your strategy on past and current charts.

·  Commence trading and, hopefully, make a profit.

Why You Should Maintain a Consistent Strategy

Every strategy explained above has particular advantages and disadvantages. When you’re only starting out in forex, it might not be optimal learning strategies for day trading that requires fast action and requires you to handle several trades at a time.

Instead, look for an easier, longer-term strategy (such as trend trading) that will give you the flexibility you need to study technical analysis, exercise smart money management and focus on your results.

Not every trading strategy is perfect. Similarly, not every strategy is well-tailored to every market. For developing markets, some approaches perform well, while some are more effective in terms of variety of unpredictable situations.

Take your time to learn how the market you want to operate in works and decide which strategies are ideally suited to those conditions.

As we draw to an end, note that all traders suffer loss – no matter how experienced they are. If you lose money in a trade, that doesn’t automatically mean you’ve done something bad or your strategy has been incorrect.

Although technical analysis will help you balance risk and reward and guide your trading decisions, no analysis can forecast the future with 100 per cent accuracy.

Practice good money management and be persistent, rather than scrapping your plan any time the market turns against you. The more time you take to study a new technique and execute it, the more adept you can become at its execution. Stick to the basics when in doubt and flow with the trend to keep the odds of winning on your side

Conclusion

ones fit better for each person. While some traders favour aggressive investments, others are averse and may like some clarity when trading.

As such based on different variables, different approaches would fit best for different individuals.

Forex is a trial-and-error process. You have to get out and try out every tactic to have a chance to become a successful trader. Experiment, adjust, and improve before selecting the one strategy that better suits you.

FAQ's

Forex traders seek to buy a cheap currency and then sell it at a better price later. Let’s assume the euro vs. us dollar is priced at 1.4070, at present.

If a trader feels the exchange rate will increase in the future, they’d look to buy the EUR/USD pair at the current 1.4050 rate. If the exchange rate hits 1.4270 after a few hours or days, then our trader will have made a profit of 200 pips.

To start trading Forex is easy. What you need is internet access, a computer, a trading site and a brokerage account.

You’ll have to test lots of them to find the right Forex trading approach. You can narrow down the search by excluding any who definitely won’t match your criteria. If you don’t have a lot of time every day to trade, you won’t be able to trade with a scalping strategy or a day trading strategy.

Test the other two major strategies – position trading and swing trading to find a strategy that fits you taking into consideration your trading time and disposition.

Whether you’re a hedge fund with big pockets or an extraordinarily gifted currency trader, Forex trading can make you wealthy. Yet, for the average retail trader, Forex trading can be a rugged highway to massive losses and possible penury, rather than being a straightforward road to riches.

One of the most critical parts of Forex trading is to understand that you can suffer certain losses at some points in time. Also, even the most experienced traders will not often have their Forex trading strategy 100% correct so they must always weigh in the chance of failure with any trade. No strategy or technique has reliably proved superior.

What you should use is what works and what suits you. It is much more important to have a trading strategy that you can implement, rather than a flawless one.

Although the percentage of Forex traders that lose money differ significantly from study to study, the truth is that many traders are going to lose money and this cannot be stopped. There are all kinds of causes for the losses, including poor management of capital, bad timing or a poor strategy. Many traders will fail no matter what tools they use.

There are some people that make a living day-trading Forex for years. But the real question is whether this is possible for you. Studies on day traders have shown that most lose money in the long run. It is something you should think about deeply before venturing into it as a source of livelihood.

A stop-loss order suits the bill for sustaining upside potential. Although the word “stop-loss” sounds good for retaining value, this isn’t effective in reality. As a loss reducing device, a stop-loss may fail as reaching the stop price causes a transaction but does not guarantee the price at which the sale takes place.

The response to this question is yes because, before a defensive stop-loss, the market must sell by a limit order. One very popular trading approach is to enter the market on a limit order and at the same time put a defensive stop to better mitigate risk by providing a predefined risk parameter.

The truth is that most traders need to take advantage of stop losses to defend themselves against huge danger. But it is also accurate that a number of experienced traders are not using stop losses.

One of the best ways to place a stop-loss order while buying is to bring it below a “swing low.” If the price rises and then bounces, a swing low occurs. It shows the price found support at that point in the market. You want to flow with the trend. The swing lows should move up, as you buy.

Forex markets are the biggest in the world in terms of trade volume. Forex assets are known as highly liquid securities, owing to their high rate of trade. However, there is plenty of risks involved with Forex trades as a leveraged commodity which can result in substantial losses.

For certain traders, it may take about three to six months to learn the ropes of Forex trading. But there are certain things you need to learn from experience and that might take around a year. It all depends on how fast you learn and how much you devote to practising.

Usually, day trading strategies are the ideal Forex trading strategies for beginners.

Many traders Moving Average Convergence/Divergence (MACD) as a very effective indicator. It is designed to measure momentum. This not only finds a trend but also seeks to gauge the strength of the trend. It’s maybe the best predictor for Forex in terms of giving you a sense of the power behind a trend.

Moving average crossovers and other momentum oscillators are two of the better technical indicators to supplement the stochastic oscillator. Moving average crossovers should be used as an alternative to the stochastic oscillator’s crossover exchange signals.

One of the easiest ways to determine the end of a trend is by using a trendline. To be more precise, the trendlines’ breakouts. If you draw a downward trend line, and if price breaks and closes over it, you should take note that this means the downward trend is most likely over.

A false breakout is when the price goes briefly above or below a main support level of resistance, but then later retreats back to the same side as it started. It is the worst-case situation for a breakout trader who exits a contract as soon as the market breaks.

The Forex trading week starts at 6 p.m. EST Sunday and continues till 5 p.m. EST Friday. Not every hour of the day is equally perfect for trading forex. The best time to trade is usually when the market is most active.

Trading can be done at any time of day, and it’s really easy to do it part-time. If you are trained and well-coordinated, as a part-time Forex trader, you could make a very lucrative side profit.

The quick answer to this question is yes and no, Forex markets cannot crash entirely, but at any moment, different currencies will crash. Forex crashes are very different from stock-market crashes in that Forex crashes typically involve a single currency.

The pairs with the greatest volatility are GBP/CAD, GBP/NZD, GBP/JPY, and GBP/AUD. They all move by more than 100 points a day on average.

Based on high levels of volatility, Monday, Wednesday and Thursday are the best days for Forex trading. Fridays cannot be predicted. Mondays are stable. The rest of the week sees the most action.

The NFP report is an American employment indicator. As a result, the currency pairs that include the US Dollar are the most influenced by the publication of the report.

Although theoretically available around the clock, on Friday afternoon, Forex trading closes and does not reopen until Sunday evening. A lot of news reports and global events will happen during trading sessions that influence currency prices.

Autumn months are the perfect time of year for Forex trading. Trading activity slows down by the second half of December – just like in August. The slowest is the few weeks before and after Christmas. It is only in mid-January that the prices start to pick up.

Professional Forex traders do use certain technical metrics in their research but they do not generally use them in the same manner as they will be used by the average retail trader. Unfortunately, retail traders do not have this knowledge and instead look for other ways to forecast market fluctuations.