Forex trading strategies are essential for a trader. A trader should know when to be Bullish or to be Bearish. Forex trading strategies help you analyze the market and to take the last step of your analysis – to buy or sell a contract. This is the most complicated part of the whole process. Determining the time of the opening and closing of positions should be as accurate as possible.
The decision often must be taken within a few minutes or hours, using various tools of technical analysis.
Key Forex trading strategies:
1. Scanning the resistance and support
Forex trading strategies include tracking the Support and Resistance levels. Break of the Resistance can become a signal for opening a long position (Buy), which can then be protected by a stop-loss order. You can place the stop-loss a little under the level of a break, which will now become the level of Support. Prices ascending up to the Resistance in a generally declining trend, as well as prices declining to the Support with a generally ascending trend can be an indication to open new positions.
2. Prices crossing the trend lines
If you are very confident in a particular trend line (i.e., if you checked it many times), the intersection of this line by prices would be a perfect time to enter into a trade or to get out of it sooner. And, of course, do not forget about the other technical indicators. In the case where the trend-line is used as Support and Resistance: buy, when prices reach an upward trend line; sell, when prices reach a downward trend-line. This can become one of your Forex trading strategies, based on the intersection of the trend-lines.
3. Scanning the breaks
Forex trading strategies usually include 3 main options to trade in the break:
- Open the position prior to an anticipated break;
- If you see that the break occurred, trade for the rollback, virtually inevitable after a break.
- Open a position at the very moment of a break;
You can additionally use a combination of the above Forex trading strategies, and try to open a position in each of these phases, i.e. before a break, after the break and during a correction, which is likely to follow a break.
4. Trading time frames
1). Holding a long position- for days or months – (is a moderately safe one of the Forex trading strategies, based on time-frames). It is best suited for strong trends. For best results, also look at the immediate options. Since this is a long position, you should also use fundamental analysis.
2). Forex trading strategies, based on medium-long positions, i.e., few days. Also analyze short-term scales. Such positions are likely the most stable for profit, but their analysis is a bit trickier. Look, as usual, for the best time for the opening / closing positions. Again, use in addition to technical analysis also the fundamental analysis, which is perfectly suited for longer timescales.
3). Forex trading strategies, based on short positions, i.e., ranging from several minutes to several hours. Fundamental analysis is in fact useless in this case, so you can fully concentrate on the technical analysis. The price will not change unexpectedly at your absence, because you’ll be constantly following it. However, risk of losses is very high, making short-term positions more suited to professional traders, and not for beginners. Another drawback is that you’ll have to have focus on the prices throughout the whole day. Try to also use the volume indicators, which will help more accurately determine the direction of the market. Also, this type of position is good for trade in breaks, and rollbacks. Generally, these positions are not very suitable for the novice trader; a novice trader is better to stay with medium-term trends.
Forex trading strategies based on technical analysis indicators will help you achieve the best results. Forex trading strategies are especially useful for choosing the right time to enter and exit the trades.
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