Dec 25 2019 4
Forex trading strategies obviously play an important role when you work with the best forex brokers. If you are looking for some forex strategies to apply to your trading plan, here are some forex trading strategies PDF that most traders in this market use.
Learn more about:
Scalping trading strategy
Scalping is a popular trading strategy that focuses on smaller market movements. This strategy works by opening a large number of trades with the aim of making a small profit on each trade. As a result, scalpers make better profits by generating large numbers of small words. This trading strategy is the exact opposite of holding on a position for a long time, days or even weeks.
Scalping is very popular in Forex due to their liquidity and volatility. Investors looking for constantly moving valuation field variations to capitalize on small-incremental turns for swing trading. This type of trader tends to focus on profits of around 5 pips per trade. However, they hope that a large number of trades will succeed because profits are unchanged, stable and easy to achieve.
One defining downside of the job expansion rate is that you can't stay in a trade for too long. In addition, the conventional scaling model requires a lot of time and annotation, as you have to constantly analyze the charts looking for opportunities for new trades. Now let's demonstrate how scalping works in practice. Below you will see a 15 minute chart of EUR/USD. The ratio trading strategy is based on the idea that we are looking to sell any attempt of the price movement to move above the 200-period moving average (MA).
In about 3 hours we created 4 trading opportunities. Each time, the action rallied above the 200-period moving average slightly before pivoting lower. The stop loss is 5 pips above the moving average, when the price does not exceed the MA more than 3.5 pips. The take profit level is also 5 pips because we focus on getting a large number of successful trades with smaller profits. Thus, 20 pips total was collected with the scalping trading strategy.
Day trading strategy
Day trading involves the process of buying and selling currencies in just 1 trading day. While applicable on all markets, day trading strategies are mainly used in Forex. This trading method recommends opening and closing all trades within one day. Not keeping any positions overnight reduces the risk. Unlike those who use scalping strategies, day traders often monitor and control the open trades during the day. Day traders mainly use the 30 minute and 1 hour time frames to generate trading ideas.
Many day traders tend to base their trading strategies on news. Scheduled events like economic statistics, interest rates, GDP, elections, etc., tend to affect the market strongly. In addition to the limit placed on each position, day traders tend to set a daily risk limit. A common decision among traders is to set a 3% daily risk limit. This helps protect your account and capital.
In the chart above, we see GBP/USD moving on the hourly chart. This trading strategy is based on finding horizontal support and resistance lines on the chart. In this particular case, we focus on the resistance area as the price is moving up. The price movement attaches to horizontal resistance and immediately swings lower. Our stop loss is above the previous high to allow for a minor breach of the resistance line. Therefore, the stop loss is placed 25 pips above the entry point.
On the other hand, we use the support level to place a Take Profit order. Ultimately, the price action pivoted lower to give us around 65 pips of profit.
Position trading strategy
Position trading is a long term strategy. Unlike scalping and day trading, this trading strategy mainly focuses on fundamentals. It is one of the successful forex trading strategies PDF. Weak market moves are not tracked in this type of strategy as they have little effect on the broader market picture.
Position traders have the ability to monitor central bank monetary policies, political developments and other fundamental factors to identify cyclical trends. Effective position traders may need to open only a handful of trades during the course of the year. However, the profit target in these trades can be as little as a few hundred pips per trade. This trading strategy is reserved for more patient traders as their positions can take weeks, months or even years to take effect.
Price Action strategy
Price action trading is trading based on the study of price history to build technical trading strategies. Price action can be used as a standalone technique or in conjunction with an indicator. The fundamentals are rarely used; however, they are still used in conjunction with economic events and are an important factor. There are several other strategies that fall within the price action framework as outlined above.
Price action trading can be used for different time periods (long term, medium term and short term). The ability to use multiple timeframes for analysis makes price action trading popular with many traders.
Trading strategy between price zones
Trading between price zones is about identifying support and resistance points. Accordingly, traders will make trades around these support and resistance areas. This strategy works well in markets with no significant volatility and no obvious trends. Technical analysis is the main tool used in this strategy.
The trading time is not predetermined because the price zone trading strategy can be implemented in any time frame. Risk management is an integral part of this strategy because in the event of a spike, the trader may have to close out any boundary-limited positions.
Trend trading strategy
Trend trading is a simple Forex trading strategy used by many traders of all levels. Trend trading offers positive returns by exploiting the directional momentum of the market. Trend trading usually takes place over the medium to long term as the trends themselves fluctuate in length. Like price action, multi-timeframe analysis is also applicable in trend trading.
Long term trading strategy
Long term trading strategy mainly focuses on fundamentals, however, technical methods such as Elliott Wave Theory can be used. Small market movements are not considered in this strategy as they do not affect the overall picture of the market. This strategy can be applied on all markets from stocks to Forex.
As mentioned above, long-term trades have a long-term outlook (weeks, months, or even years!) This is a strategy for persistent traders. Understanding how economic factors affect the market or technical trends is essential in forecasting trading ideas.
Medium-term trading strategy
Mid-term trading is a speculative strategy. With this strategy, the trader will have to find a way to take advantage of the trading margin limits as well as the market trend. By selecting the 'top' and 'trough', traders can enter into suitable long and short positions. Mid-term trades are so named because positions are usually held between a few hours and a few days. Long-term trends are favored because traders can capitalize on the trend at multiple points along the trend.
Effective forex trading strategies
Forex trading requires a combination of factors to form a trading strategy that works for you. There are countless strategies you can adopt. However, it is essential to understand and feel comfortable with the strategy. Every trader has unique goals and resources, which is something you need to consider when choosing the right strategy.
Are there three criteria traders can use to compare whether strategies are a good fit?
- Time spent on the transaction
- Frequency of trading opportunities
- Typical distance to target
To easily compare forex strategies on three criteria, the article has shown these criteria in a bubble chart. Vertical axis is 'Profit/Loss Ratio', strategies at the top of the chart are more profitable but risk per trade is also higher. Long-term trading is usually the strategy with the highest profit/loss ratio. The horizontal axis is the time invested representing the amount of time it takes to actively monitor trades. The strategy that requires the most amount of time is scalping due to its high and frequent trading frequency.
Every trader needs to find effective forex trading strategies PDF that suit their trading style. Choose your own trading strategy by finding your preferred time frame, desired position size and the number of trades you want to open. Scalping is a popular trading strategy that involves opening multiple trades in a short period of time to take advantage of smaller market movements. Day traders tend to open and close all trades within a day. Position trading is intended specifically for more patient traders with a background in finance and economics as they seek to profit from long-term market trends.