Forex trading is a type of investment option for plenty of people. It is preferred as it can be used to achieve both short term and long term goals. Moreover, forex trading is considered to be the biggest financial market trading in the world. This involves trading through global currencies. A person or an organisation will select the currency pair to initiate the trade. Many consider that using a trading strategy is extremely essential. A trading strategy will include limits, budget, and time. This will be based on various factors like the target of the individual. There are a few defined trading strategies that can be followed for forex trading. In this article, we will look into the 7 most successful forex trading strategies. This will also tell you about the brokers for forex trading.
Why to Consult a Forex Broker before going for any strategy?
None of the mentioned strategies can promise 100% success. They are used by many traders, but not everything works for everyone. Brokers in forex trading will help you determine the right strategy for you. They will provide essential help on where to trade, trading position, investment ideas etc. This will be useful for both beginners and experts as they always seek the required information. You can find a reliable FX-List and select the best Forex Broker for you.
Forex Trading Strategies
1. Every hour forex trading strategy
This is a time-bound strategy making it extremely suitable for forex trading. This makes use of 60 minutes to complete trading, which in turn will require very high-end pairs of currencies. This will include USD/JPY, AUD/USD, GBP/USD. It is also recommended to use other currency pairs according to the present day scenario. The most important aspect of forex trading is staying updated. And with this strategy, that is highly essential. Using the MACD is optimal for this strategy.
● When the MACD histogram reaches above zero, you can go for a long position. The stop loss factor should be kept at a low limit.
● While the MACD histogram goes below zero, go for the smaller position.
This can be followed at any time during the day between when the trade is opened, and trade is closed. Hence, this strategy is coined as a short term trade. This will open up numerous trading options in one day. Moreover, the risk factor is also not very high.
2. Scalping strategy
Scalping is a very common business and trading strategy. This is used when a lot of profits on a small scale are made at frequent time intervals. So, positions are frequently closed and opened. As this is a common strategy, algorithms can also help in scalping. It is always recommended to make a manual to understand the highs/lows. The currency pairs in this strategy are mostly liquid. Only then positions are tight, which in turn makes a short term profit doable.
Most traders use MACD to determine entry or exit points. This strategy will maximize the number of opportunities to trade within a short amount of time. But, this has a very low risk-reward ratio. As the amount of time is low, good experience and analysis are needed.
3. Forex position trading strategy
As far as forex trading is concerned, both long term and short term strategies are applicable. However, many prefer the long term as it will get consistent, and losses can be avoided. The positioning strategy for trading is long term. This is suitable for people with a little experience in trading. As this involves predictions and forecasting. It is important to predict the entry and exit from one position. This is affected by market fluctuations.
This is a suitable strategy for forex trading as it is spontaneous, and so is the market.
4. Contour trend strategy for Forex
This is one of the strategies that have a very high success ratio in forex trading. However, this is based on previous patterns of profits and losses. When a person uses this strategy, he/she completely depends upon the highs and lows of a similar position. This is highly unpredictable as it can see a downfall too.
Analysing downfalls from previous times is a good thing. While using it as a strategy to trade will require a lot of experience.
5. Swing trading for forex
Swing trading is preferable for its size of the position. It is ideally small or medium without involving serious risks. Forex traders use indicators and oscillators to determine the entry/exit points. This can extend from weeks to months while trading in a position. It is possible to achieve an optimal risk-reward ratio making it more profitable. However, the risk involved is not zero. As the risk is minimal, this strategy opens up to various opportunities. As the strategy is based on range, it will require a lot of time.
6. Hour based strategy
Generally, people prefer an hour based strategy for achieving short term goals. This is common in popular locations that are known for trading. The impact of the fluctuations is maximum here, and that's why it is profitable. This strategy uses a signal chart to determine positions. This is checked on an hourly basis, and entry/exits are made. Sometimes constant fluctuations reduce the number of opportunities. This will also require a lot of analysis.
7. Weekly trading strategy
The market's fluctuations are fully based on everyday exchanges. In a week, these changes may be predicted based on the activities. This is more stable than hourly basis trading. This will help in avoiding risks and also fetches lower positions. In a weekly based strategy, trends like the hammer and engulfing candles are used.
While choosing any forex trading strategy, you must consider a number of factors. This will include the following -
● Risk reward ratio
● Type of position obtained
● Amount of time invested
● Long or short term based goals
These are the key points to consider. It is easier to deduce a strategy in this way.
To master forex trading, it is vital to attend webinars, applying strategies through demo sessions etc. This helps in sharpening the trading skills in a dynamic market.