What are Forex Trading Strategies: Forex trading is very popular all over the world and it is growing rapidly in India as well. Many investors want to know about Forex Trading Strategies for investing in Forex Trading, but many fail to find an appropriate answer.
Before talking about Forex Trading Strategies, let’s understand what is Forex Trading and is Forex Trading profitable?
Forex trading or currency trading is a type of buying and selling of foreign currencies or money. It is a very volatile market and can be very challenging for new investors and traders.
The biggest risk is that the forex market is affected by news and events, but the true impact of that news or event cannot be identified because the currency is in a trading pair.
A similar phenomenon can positively affect both pairs of currencies at the same time, and thus the full effect on pairs cannot be anticipated.
Thus, it is important to understand how to start forex trading or how to make the right strategy for it.
To manage the risks, investors have to use some good forex trading strategies. So that they can accurately identify the main points to invest and exit in the forex market and a good time to do so.
Although, what should be the right strategy also needs to be taken care of.
A “strategy” is a set of analysis used by a trader to know whether to buy and sell currency pairs (currency pair) at a given point of time.
Some successful traders have created and implemented many different currency strategies that ensure maximum profits and low risk. This strategy triggers a buy or sells signal.
They may be based on fundamental analysis, including fundamental indicators that may relate to particular events affecting the economy.
Similarly, they can also be based on technical analysis, in which past trends of currency prices and their behaviour are studied to anticipate the future.
A better forex trading strategy is which currency pair you want to trade in, the size of each position that controls the risk of your trading, and help determine entry points, exit points and specific techniques for implementing your strategy. Does.
What are Forex Trading Strategies, Best Forex Strategy
Following are the top 7 Forex Trading Strategies used in forex trading:
1. Price Action Strategy
It is one of the simplest and most used forex trading strategies. It is not based solely on price action and no indicators or technology. The basis of this strategy is that forex trading is explicitly based on price action-bull and bear.
In the price action strategy, it is important to understand whether the bull is controlling the current prices or beer and then take action accordingly.
If the trader’s analysis says that the market is under the control of the bull and is likely to be under control, they should buy and sell if the market is under the control of the bear.
To provide an opinion on market control, traders should use methods such as support and registration and candlestick.
The biggest strength of the price action strategy is that it works in all market conditions, whether it is trending or volatile or less volatile.
This makes the strategy efficient and comfortable and helps eliminate the noise around highly volatile price movements.
An example of a price actioner strategy is the Bladder strategy using candlesticks, pivot points, round numbers, and support and resistance levels.
2. Trend Trading Strategy
Trend trading is one of the most successful forex trading strategies. As the name suggests, this strategy involves identifying and following trends.
The trader knows whether the price movement of the currency is up or down and then select the entry point.
To identify the trend direction, traders can use tools such as moving average, stochastic, relative strength indicator (RSI) and others.
This strategy can be used by new and experienced traders as it is not very difficult to identify trends using specific tools.
Even if the trader does not know the exact time of a trend, he can earn good profits by entering the market as soon as possible.
This strategy helps a trader get out of this position and show them the right direction by pips.
Currency prices are also influenced by trends in global events such as inflation, interest rate policy and government policy.
Therefore, the trend-based trader needs to keep an eye on the news around the world so that he can take advantage of it.
3. Counter-Trend Trading Strategy:
Counter-trend trading is one of the most successful forex trading strategies. This strategy is very useful initially, as it helps in building the confidence of the trader due to the high success rate.
The basic premise of this strategy is that the trend itself changes. A breakout strategy does not extend to long-term trends.
When the trend reaches its peak, it is expected to improve soon. This approach can be more difficult and challenging than the following approach.
The hardest part is to make sure how the trader considers it as extremely high or low, is it the highest price?
An opposite trend can be more challenging than forecasting a trend because markets are very volatile and can take any direction at any time.
4. Range Trading Strategy:
Range trading is one of the most popular currency trading strategies. It involves trading under a constant and predictable range of currency prices. The basis of this strategy is that prices remain within a range for some time.
To succeed in this strategy it is necessary to identify favourable price points. That is, the price level at which traders stop selling and buyers are expected to start buying.
These price points are related to the level of supply and demand of the currency which is shown by support and stability.
The trader buys the currency and expects the price to come in the long-term average. Range traders mostly buy or sell currencies at approximate higher and lower prices of support and resistance.
Also, to know support and resistance, some technical tools like Relative Standard Strength Index, Stochastic etc. are used.
This strategy is most effective for currency and economy that are stable and are not affected extensively by news events.
5. Breakout Trading Strategy:
One of the effective currency trading strategies is the breakout trading strategy. Under this strategy, the trader enters the market at a time when the market is outside its previous trading range.
If the price rises higher than the previous resistance level, the trader can expect prices to rise higher by entering this breakout point, and similarly, if the price crosses the previous support level, the trader will move the market further down Hopefully can sell at that time.
Before prices go up, there is a level of consolidation where prices remain in a steady range and often fall at support and resistance levels. Just before the breakout, when the trader wants to go or exit the market.
The breakout trading strategy becomes very attractive to the forex trader, as the market is prone to volatility and breakout, both real and unrealistic.
The forex trading market is known for high volume trading as well as fake swings by supercomputers. These breakouts work effectively for many traders.
6 Position Trading Strategy
One of the long-term currency trading strategies is the position trading strategy. This is a strategy that does not work on intraday or short-term, but for weeks, months or years on a long-term basis.
For a position trading strategy, traders can take positions by looking at macroeconomic trends of economies in the long run.
They can keep their leverage and lot size low, as they try to make big profit profits due to high prices for a long time.
The position trading trader must have a good understanding of fundamental analysis and the most important requirement is to be patient as well as more capital to trade, as this strategy does not provide immediate benefits to many people.
Traders must perform fundamental analysis and look for macroeconomic trends and then enter and exit conditions using technical indicators to determine them, and then wait for favourable results that may take months and years!
Therefore, the position trader must have a complete understanding of the fundamental principles. However, position trading is also beneficial because it does not cause daily stress due to low price fluctuations and is less risky and more beneficial in the long run.
7 Carry Trade Strategy:
Carry trade is one of the unique currency trading strategies. Under this strategy, traders take advantage of the interest rate differential between two countries whose currency is being traded to take advantage of the currency price movement.
Ideally, when a trader buys a currency and places it overnight, he pays the interest rate according to the country’s bank of the currency.
Therefore, to get additional profit, the trader trades and sells the currency of a low-interest rate country and buys the currency of a high-interest rate country and gains from the difference.
This strategy mainly accompanies the trend trading strategy to maximize profit.
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