Forex trading is pretty hot right now and it seems more and more people decide to give it a go. If this is the case with you, chances are you’re trying to come up with a forex trading strategy that does the trick for you. And to help you do this, we came up with five of these you simply have to consider.
1. Position trading
This is a long-term approach that requires you to hold trades for a longer period of time, sometimes even months. Still, most of the time, you’ll trade on a daily or weekly basis and you’ll need to base your trading on fundamental analysis. Of course, we’re talking about things such as NFP, GDP and retail sales. What’s so great about position trading is that it doesn’t require too much time, since all of your trades are long-term. That means this is a great strategy for anyone who’s trading forex while maintaining their 9-to-5 job. Also, position trading shouldn’t cause you too much stress as you won’t have to worry about short-term price fluctuations.
Scalping is a pretty short-term strategy where you’re supposed to hold trades for minutes or sometimes even seconds. If you decide to go for this strategy, you only need to care about what’s happening on the market right now and how you can benefit from it. The tool you’ll need to use if you opt for scalping is order flow. It’s supposed to show you the buy and sell orders in the market and help you make decisions more effectively. Even though scalping offers you a lot of trading opportunities every single day, it still comes with a big financial cost, mostly because of the transactions costs which have the power to kill all of your profit.
3. Swing trading
In case you’re wondering what swing trading is – it’s a medium-term trading strategy where you are able to delay your trades for days but you usually complete them within the first few hours. The whole idea behind this strategy is to capture a single move in the market. That one move in the market is usually referred to as a swing, thus the name swing trading. What makes swing trading a good option is a fact that you don’t have to give up your day job in order to be able to do it. And with so many trading opportunities, you’re able to stay profitable every year.
4. Day trading
If you’re looking for a strategy that includes holding your trades for minutes or hours, day trading is the right option for you. Think of it as something similar to swing trading, but at a bit faster pace. With day trading, your goals will usually be to capture the intraday volatility. In other words, you’ll aim at trading the most volatile session of your instrument. It’s also important to mention that being a day trader means you don’t have to keep up with trends or think about the fundamentals of the economy. Of course, if you want to be a day trader, finding a good FX broker is an absolute must.
5. Transition trading
The whole idea behind transition trading is to trade on a lower timeframe and adjust your tactics according to what’s happening on the market. So, if it seems like things are starting to go in your favor, you can think about increasing your target profit. In other words, you don’t take profit even though you can, but you wait for a better move, one that will bring you more profit. This means that sometimes you might just be able to get a nice reward form your short-term moves. However, opportunities for monster winners don’t come up as often as you’d probably want.
Identifying the strategy that works best for you and sticking to it is an important part of being a forex trader. Think about how much time and effort you will be able to put into forex trading and what kind of risk you are willing to take. Once you have the answers for all of these questions, figuring out which strategy does the trick for you shouldn’t be too difficult. Even once you do this, make sure you keep looking for some new strategies you’ll be able to try.