Forex Trading Strategies
If you’re looking for a way to make money with forex, you’ve come to the right place. In this article, we’ll cover Positional trading, Trend-following, Counter-trend, and Scalping strategies. While each one is valuable, you’ll want to choose one that fits your style of trading the most.
Positional trading
Positional trading is a type of long-term trading wherein a trader tries to catch a juicy portion of an asset’s move during a long-term trend. Most assets follow a regular pattern of price movement that is driven by fundamental changes. However, some assets remain dormant for long periods of time before deciding to move. When this happens, the price of the asset may rise or fall significantly for weeks or even months. This means that a positional trader may be able to capture the most lucrative portion of the move while keeping their capital in place for the long-term.
The first step in positional trading is to understand the concept of support and resistance levels. These levels serve as guides that will help you determine the direction of a trend. The next step is to identify a good entry point. One way to do this is to use a technical indicator that shows the RSI or stochastic level of an asset.
Trend-following
Trading trends is a simple concept: take the high and lows of a chart and connect them together. If the highs are higher than the lows, the trend is upward. Conversely, if the highs are lower than the lows, the trend is downward. The key to success with trend-following is to have a plan for sizing your risk and sticking to it.
The first step in using this strategy is to establish a stop-loss strategy. Set your stop-loss level at a low level and use a wide trailing stop to capture the trend’s highs and lows. This allows for ample price movement before you close the trade. In addition, it ensures that you stay in the trade for the duration of the trend. Tight trailing stops are counterproductive because they force you out of the trade when the trend ends.
Trend-following relies on a well-defined trend. It eliminates the need for discretion or gut feelings. In addition, it doesn’t involve 24-hour news cycles, fundamental analysis, or talking heads. Trend-following is also very low-correlated to other investment opportunities.
Counter-trend
Counter-trend trading is a strategy that focuses on analyzing price trend patterns and buying or selling an asset after the price shifts. This strategy is more profitable than swing trading, but it also comes with its own set of risks. One of these risks is that a trader may not make money at the very start of a trend. Therefore, it’s important to monitor your risks and follow a proper risk management strategy.
The key to a successful counter-trend forex trading strategy is risk management. This includes paying special attention to position sizing. Betting too little can lead to sub-par percentage returns, while betting too much could cause a trading account to undergo significant losses. Generally, counter-trend traders follow a 2% risk per trade model to avoid excessive risk and maximize potential returns.
Counter-trend trading is based on the principle that after three consecutive pushes in the same direction, the price will often reverse. This is known as the “third push” in Elliott wave theory. This reversal pattern can come in the form of a single hanging man or shooting star, or as the second candle of a double bottom candle pattern.
Scalping
Scalping is one of the most popular forex trading strategies that many traders use. This type of trading involves entering and exiting trades quickly and in small amounts. You will spend only a few minutes in the market for each trade, allowing for lower exposure to risk. This style of trading assumes that smaller, frequent moves will lead to greater profits. It’s best used during the most liquid times of day, which are usually 2:00 am to 4:00 am and 8:00 am to 12:00 noon Eastern Time. Traders who use scalping techniques will need to be patient and don’t get greedy when entering or exiting trades.
Scalping can help you turn a 2-pip loss into a big gain in a very short time frame. To do this, you should look for currency pairs with higher volatility. Another important factor to consider is choosing a broker that does not have a dealing desk. Otherwise, you risk rejection, which can be devastating to your trading account.
SOURCE: Ghnewslive.com
