The 5 Types of Forex Trading Strategies
Forex traders can use numerous forex traders.
The key is to realize which strategy best matches the trade results they wish to achieve.
Listed below are some of the top strategies that are used by the traders and being a beginner in this trade you should consider too:
Forex Trend Following:
Forex trends following strategy utilizes the market trends and guides the traders in direction of their long-term goals. Channel breakouts, current market price calculation and moving average are used normally to generate signals so the best market direction to take can be determined. Traders use these strategies to follow the market trend.
Multiple trades are involved in the forex scalping strategies. Each of the trades is capable of making small profits on their own. When these scalping strategies are used the profits made range from 5-10 pips for each trade that takes place. A constant market analysis is required for these strategies and trader is required to place multiple trades at a time.
Forex scalping strategies are demanding therefore traders need to be quick in predicting the direction of the market so that positions cab be opened and closed quickly.
Forex Pivot Point:
Pivots allow the identification of entry point particularly for the range bound traders. These points tend to be helpful for the both trends traders and breakout traders and enable them to identify the key points that need to be broken. Those traders with the understanding of calculations and pivot would find these strategies especially helpful. It is essential to remember that using closing prices for calculating pivot lessens the accuracy and important of point of rotation. The calculations have to be accurate.
The forex market tends to get volatile sometimes with prices making sharp jumps. The volatility systems are made to that price actions can be taken advantage of. They are best for quick trades and short terms. The systems are based on increase of volatility and though the profits earned on each trade tends to be low comparatively but the winning percentage of the trades may be higher. This strategy best suits the investors and the traders who understand the concept of volatility.
Forex Chart Pattern:
Charts play an extremely important role in helping the forex traders. Different chart patterns are used in forex trading but the most common patterns happen to be head and shoulder and triangle. The head and shoulder pattern happens to have a topping formation during an uptrend and has a bottoming formation in the downtrend. The pattern tends to complete the head and shoulder when there is a break in the trend line. Mostly the short term frames have triangle patterns. These can be symmetrical, descend or ascend. The low and high of price creates the triangle to a tight fit of price area.
Some of the other forex trading strategies forex traders can use are forex support and resistance, forex breakout, forex swing trading strategies, Bollinger bands and forex candlestick.