To many on the outside, forex looks so much like a quick-money game, an art of generating quick profit. Well, let us tell you: this is anything but the case. The world of forex can be difficult, complex, cutthroat, and even confusing at times, and this is simply the truth of the matter. For this reason, every aspiring and existing trader should always carry the correct approach to trading, which comes from adopting an effective trading strategy and using it in the right way. We understand that not every trader has access to the right trading mentorship, which is why we are going to enlighten you on some of the active trading strategies used by various successful traders.
Range Trading
This strategy ranks top of the pile in terms of simplicity. It is a very simple strategy that has proved effective for many successful traders and if you leverage it correctly, it can also be a game-changer for you. It involves buying a currency, with the expectation that the value will move back to the longer-term average. The key factor to making this strategy work in a real market world is to identify those price points that hover in “bargain” territory. This means finding a price to enter at where the sellers have held back on closing positions and buyers are likelier to start buying. In range trading, you need to understand the levels of resistance and support in order to get a grasp on what is what, with this coming about through technical analysis. Do you know so much about indicators and oscillators? Well, they come in handy when you are implementing range trading.
News Trading
This strategy is currently experiencing a popularity surge, and there is a very good reason why it is so. Despite being analysis-dependent, news trading brings traders closer to those actual news and trade developments that drive the forex market in both directions. Every single day, a minimum of seven vital data will be released, so there is plenty for any player to get stuck into. However, news trading is a highly predictive strategy because it is based upon predicting market directions on the data released. Even though it is a strategy that has worked well for many successful traders, it can sometimes be a volatile approach to take.
Swing Trading
Swing traders are known to be cautious traders. They sit back and observe when a trend breaks within the forex market. Once this trend-break happens, they swing into action and “get in the game.” Market trends usually hit a conclusion with a certain degree of price volatility, with a new price waiting to emerge. What swing traders often do is become active when this volatility hits, selling and buying when other traders are busy contemplating movements. Swing trading entails carrying a trade position for more than 24-hours but not holding it long enough till it bleeds over into trend trading. If you want to join the league of successful swing traders, what you do and the moves you make will be dictated by a set of trading rules, which will be established via technical analysis. Swing trading can be exciting, profitable and risky at the same time, which is why you need to trade with the best forex broker if you are just learning the art of swing trading.
Scalping
Scalping brings on negative connotations when mentioned in different aspects of life, but that doesn’t apply in the realm of forex trading. In fact, from a speed perspective, scalping ranks easily as one of the quickest trading strategies in the world today. Similar to what the word means in other aspects of life, scalping entails exploiting the gaps created by order flows and ask/bid spreads. Considering the nature of scalping, you will need to always be on your toes, if you want to adopt this strategy because you are going to be making the spread or buying at the bid price, before moving to sell at the ask price. Your profit will come from the difference between these two prices. Risk is quite minimized with this trading approach, as positions are only ahead for a short amount of time. It is all about trading at speed when it comes to scalping as traders don’t exploit large moves. While swing traders prefer a chaotic and noisy marketplace, scalpers prefer a calm and quiet market as they look to make their moves.
Other essential strategies include Day Trading and Position Trading!
- Author Name: Uday Tank
- Author Bio: Uday Tank has been working with writing challenged clients for over five years. His educational background in family science and journalism has given him a broad base from which to approach many topics. He especially enjoys writing content after researching and analysing different resources whether they are books, articles or online stuff.