To do trading in Forex, a trader should adopt the Forex trading strategies that are suitable according to his trading habits and manner, which gives him more profit on this basis.
Suitable trading techniques in Forex will teach traders when to trade, for how long, and how to manage their money. Each trading strategy has rules and regulations. The strategies can be either easy or complex, varying from trader to trader.
Every trader should have a trading strategy that will allow them to measure their performance easily and accurately.
How to Choose the Best Forex Trading Strategy?
In the beginning, very few traders get to know the best technique in Forex that suits their trading manner. Mostly, traders spend their time on the demo accounts trying different strategies and choosing the best one for them. Some keep changing their strategies while still being confused and not understanding the nature of the market.
Traders, after finding the best forex trading strategy that gives them satisfaction and good results, won’t be able to stick to it throughout their forex trading journey, as the market volatility keeps changing and evolving. Thus, the traders also have to evolve with the market to survive in it.
The beginners are recommended to stick to a simple trading strategy because using every strategy and too many complicated strategies may result in information overload, confusion, and stress to the trader about the strategy they chose earlier.
Common Trading Strategies in Forex for Beginners
A trader, after practicing every trading strategy on the demo account, has to choose the best trading strategy for him in the Live Trading Account. The trader can’t stick to just one trading strategy, but the market is not changing its nature every time. So, the trader should choose the trading strategy that he can trade with most of the time.
Following are a few common forex trading techniques for beginners to choose from according to their trading nature:
- Trend trading strategy
- Position trading
- Day trading strategy
- Scalping strategy
- Swing trading
- Breakout strategy
- Retracement trading
- Grid trading
1. Trend Trading Strategy
This forex trading strategy involves trading along with the ongoing trends in the Forex market. The traders trade according to the opportunities going in one direction of the trend. The trading instrument goes up and down according to the current trend.
The trend can be easily detected, as in the case of rising prices, it indicates uptrend. In the same way, when the prices go down, it indicates a downtrend in the market.
2. Position Trading
The main goal of this trading technique in forex is to seize profits in long-term trend moves while ignoring short-term trends. This type of trading strategy goes long term and can start from the week and can go for years.
It is considered to be the most difficult trading strategy which needs discipline and ignoring noise, but once you learn how to trade with it, you will be able to earn more profits in the long- term.
3. Day Trading Strategy
Day trading is suitable for those who close their entries before the trading day ends. The traders who like to trade without worry of too much loss may adopt this strategy in which they trade two to three times a day at a particular peak hour of some specific opportunity.
4. Scalping Strategy
The scalping strategy is done from a few seconds to minutes about ten times a day. The traders have to be good with decision-making and the numbers for this strategy, even under pressure.
The scalpers have to be fully focused on the trading session they are engaged in to make the decisions if they have to make any. They see multiple market trends alongside to enhance their decisions.
It may not be a good forex trading strategy for beginners as it comes with a lot of pressure.
5. Swing Trading
This trading is open for multiple days and the traders with patience and discipline are most likely to pursue it. Traders who don’t have patience tend to close their positions early.
If you are the type of trader that fully analyzes the market after opening the position without any stress then you may find this swing trading a suitable option for you.
6. Breakout Strategy
In the breakout strategy, the traders aim to enter a trade as soon as the price breaks out of its range. Traders always look out for the strong momentum.
Once they open a position, the traders have to closely monitor all the trading activities of the market to see the range’s uptrend and downtrend. The traders place the stop below the resistance and above the support level. Traders may use classic support/resistance levels to set their exit targets.
7. Retracement Trading
Changes in the direction of certain trading instruments included in the Retracement trading. Retracements and reversals are often confused with each other. While the reversals indicate a major change in the trend, retracements are just temporary pullbacks.
In the Retracement strategy, you are still trading in the direction of the trend of a Forex market. You are trying to capitalize on short-term price reversals within a major price trend.
8. Grid Trading
In this forex trading strategy, multiple orders are placed above and below a certain price. This is done with the motive of getting profit from volatility by placing buy and sell orders at regular intervals.
When your position gets larger, it indicates that the price is moving in one direction. It comes with a risk of getting false breakouts or a sudden reversal.
Ways to Compare Trading Strategies in Forex
Every trader has a different personality and skills for trading. For example, some traders are impatient but are good with numbers and quick decision-making. Meanwhile, other traders are more comfortable in analyzing the market trends and then opening their positions.
So, the forex trading strategies or techniques are meant to bend according to the trader’s personality and not the reverse. Therefore you can compare the Forex strategies according to the traits and personality of different traders.
Conclusion
Selection of a suitable trading strategy in Forex is a crucial part of the trading journey if you want to survive in the Forex market and gain profit alongside. It needs cautious thought of individual goals, risk tolerance, market conditions, and a complete understanding of the selected strategy’s principles.