As a new trader you must consider the type of forex trading strategy you will utilise. Some traders choose to use multiple forex trading strategies so as to adapt to the market’s ever-changing climate. However, all effective traders have a primary strategy to suit their overall trading type. This is the one they will use more frequently. In order to determine your primary strategy you must educate yourself in different forex trading techniques. Below are four of the most well-known and effective strategies available.
The day trading strategy
Out of the 4 common forex trading strategies day trading is perhaps the most well known. When people look at trading of any kind they think of day trading because this is how many professionals trade. The basis of day trading is that you hold a position from minutes to hours, but never for longer than one day. You are also not able to hold any positions overnight.
The most common means of trading with this strategy is through trend trading. Trend trading will look for trends in the daily chart and then open a position based on this. Trends can move up or down and you are able to make a profit from both of these trends.
The scalping trading strategy
Many traders consider scalping to be a type of trading on its own while other view it as part of day trading. The basis of this method is to make multiple extremely short-term trades to make a profit. These trades generally last no longer than a few minutes. To use this strategy you have to have high risk tolerance because traders usually use high leverage with this. The need for high leverage comes from the small profits this trading strategy makes. Each trade should make around 5 pips profit and this does not add up to much unless you are using leverage to increase the price movement values.
A swing trading strategy
Swing trading is seen as the in between trading strategy. Swing traders hold positions for more than a day, but not longer than a few days. This is often called medium-term trading because it is not day trading, but not position trading either. These traders generally look for trends that will last more than a day. The analysis methods for these traders are a combination of technical and fundamental.
Position forex trading strategies
If you are looking for long-term trading then the positions trading strategy is the ideal choice. This is the typical buy and hold type strategy where you open a position and hold onto it for a number of days. With positions trading you generally do not hold a position open for less than a full day. Most of these traders will hold a position for as long as a week before they close it for profit.
When you look at position trading you are not looking at a set price. You are looking at the overall direction of the market and this is why many of them rely primarily on fundamental analysis. It is hard for position traders to calculate the exact profit they are looking to make from a trade. These traders also need deep pockets to buffer the up and down movements of the market.