Forex trading strategies are essential for a trader to know exactly when to sell or buy a currency pair. The time of purchase or sale of foreign currency pairs is the most important point of a trade. The better that the trader is able to determine the time of entry / exit, the more profitable is a potential transaction. This can be achieved with sound Forex trading strategies.
The decision often must be taken within a few minutes or hours, using various tools of technical analysis.
Main Forex trading strategies are:
1. Scanning the resistance and support
Forex trading strategies, based on the break of a resistance, often give a great signal to buy. Buy and protect your position by the stop-loss order, which should be placed below the level of the occurred break (break level now turns to a new level of support). A new position can also be opened, if in the downward trend the price went up to the line of resistance, or if at the time of a rising trend the price fell to support.
2. Prices crossing the trend lines
Looking for the price to cross the trend line is yet another one of common Forex trading strategies. Prices crossing the lines of the trend allow a trader to enter the market or to exit the market early enough, especially when the crossing has occurred on a "proven" trend-line. However, do not forget the other indicators of technical analysis. When using the trend line as the level of Support and Resistance, long positions (Buy) should be opened on the fall of prices to the level of an upward trend, and short positions (Sell) should be opened with the rise in prices to the level of a descending trend-line.
3. Breaks
Three Forex trading strategies for trade at the time of breaks:
- Open a position in advance, in the anticipation of a break;
- Manage to enter the market at the moment of the break;
- Wait for the inevitable roll-back after the break, because in the market after a break, there is usually a correction.
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. Choosing a suitable time frame
1). Forex trading strategies, based on long positions, i.e., ranging from several days to several months. It is best to use this tactic in the presence of strong trends. At the same time, analyze short-term scales. Be sure to use in addition to technical analysis also the fundamental analysis, which is perfectly suited for long timescales.
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). Holding a short position - minutes or hours (the least safe of all the Forex trading strategies, based on time-frames). The advantage of short positions is that they have virtually no risk on the impact of fundamental news, as well as the price will not change while you were absent because you'll be watching the prices the whole time. The disadvantage is that the risk of loss is great, as well as you have to constantly monitor prices during trading until closing. To make the right decisions, it is best to be armed with data on the volume of sellers and buyers. This will allow you to much more precisely determine the subsequent direction of the market. Such ultra-short-term trading can also be used at the time of breaks as well as in the rollback of prices after the break. Basically, such positions are better suited for traders with extensive experience, while for beginners such positions hold too much risk. The second strategy (trading in medium-term trends, with duration of up to several days) is most suitable for the novice trader.
Sound Forex trading strategies will aid you in finding the best times for your transactions. Sound Forex trading strategies remain useful for decades.
Author Resource:
Author Steve Maenshel has been a professional trader for ten years. He can help you understand forex trading strategies . For more forex trading information, visit his forex resource center .
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