Jun 05 2021 2
When it comes to choosing a trading strategy, you should look at the professional trading strategies PDF because they are used by the best traders in the market. Here are 5 professional trading strategies in the forex market that traders often choose:
Scalping is a trading strategy that holds an order for a few seconds to a few minutes. The goal of this strategy is to take small profits on many trades per day. Choosing this strategy, the trader will trade on the M1 or M5 frame with a small number of pips.
Because of the large number of transactions, when choosing Scalping, you should choose a forex broker with small spreads or low transaction commission costs. This strategy has many potential risks and requires traders with a stable mentality, a strategy, good analytical ability and quick reaction.
How does scalping work?
Scalpers believe that profiting from small price movements is less risky than taking risks with large price movements. This involves a tight setting of trading windows, in terms of both price movement and timeframes.
Scalping means a lost opportunity cost of taking larger profits, so it requires discipline. Scalpers exit the trade when their profit target has been reached, rather than waiting to see if they can make more profits. They also exit the trade when their target loss is reached, rather than waiting to see if the trade turns around.
Market analysis for scalping
Traders who adopt this method of scalping rely on technical analysis rather than fundamental analysis. Technical analysis is a way to gauge the past price movement of a derivative. Traders use charts and indicators to find trading times and place and exit orders.
With intraday trading prices displayed in real-time charts, scalpers can observe the price action of derivatives. Using known indicators, scalpers try to predict how the price will move in the next few minutes. They then establish support and resistance points and use them to enter and exit positions.
In contrast, fundamental analysis involves using data from a company's financial statements to calculate ratios that help determine value based on investment objectives. This allows traders to evaluate a company and manage risk to increase their assets over time.
Fundamental analysis is more suitable for long-term investing, while technical analysis is more suitable for short-term strategies such as scalping.
Scalpers can trade on news or an event that changes the value of the company upon release. In some cases, they may use short-term changes in the underlying ratios to trade scalps. For the most part, they focus on technical indicators and charts.
Since these charts represent past prices, it will depreciate if the horizontal timeline rises. Horizontal timeline for how long to hold a position. The longer scalpers hold a position, the less value that position tends to have on them. That is why technical analysis and trading indicators are better suited to short-term trading.
Scalpers can be discretionary or methodical traders. Arbitrary scalpers quickly make trading decisions based on market conditions. It is up to the trader to decide the parameters of each trade (e.g. time or profit target). Scalpers have methods that rely less on their instincts. Instead, they use automated surfing computer programs with artificial intelligence to execute trades based on criteria set by the user. When the program sees a trading opportunity, it takes action without waiting for the trader to evaluate the position or trade.
Arbitrary scalping involves the trader's opinion in the trading process and can be risky. Emotions can lead you to make a bad trade or not take action at the right time. Methodical scalping gives the trader no control over trading decisions, making trades non-arbitrary.
Basically, scalping means you open and close your trading positions very quickly, and you will be trading a lot of positions in a day. So you will need a broker with low spread and low commission. Spread is the difference between the Buy price and the Sell price. Lower spread means less loss. Commission is charged whenever you complete a trade. Because you trade multiple times a day, you will need low or no commission. Here are some brokers with low spread and low commission:
2. Day Trading
Day Trading is a day trading strategy, orders will be opened and closed during the day, not overnight. To be safe, traders often install SL, TP fully and follow the technical analysis school mainly. Day Trading also requires a lot of time to track orders and process when the market goes against the predicted trend. The number of pips fluctuates usually no more than 100 pips/currency pair.
How does Day Trading work?
This is an intraday trading style, opening and closing orders on the same day and not holding orders overnight. Investors who use this strategy often take advantage of small waves and small fluctuations
Just like the Scalping strategy, Day Trading is only for people with a lot of time. Because of the nature of this method, traders need to have time to observe and place orders so as not to miss an opportunity.
Day Trading strategy timing
Day Trading order holding time is very diverse, depending on Trader's trading strategy and timeframe:
Hold orders 12-24 hours: This is the ideal holding period when trading Day Trading. With this holding period, it is easier for you to analyze the market (have plenty of time to analyze) as well as avoid sudden market fluctuations.
Hold orders for a few hours: In the period of holding Day Trading orders for a few hours, traders are forced to make faster trading decisions, more orders and of course, higher risks.
Hold for a few minutes: The holding interval in minutes is also known as Scalping. Scalping is not suitable for new traders because the speed of the market changes is too fast, there are many big fluctuations and especially the market action will be much more unpredictable.
The best brokers for day trading strategy
So for day trading, you will need brokers who allow you to trade bigger volumes because you only trade during the day. You don’t keep your positions overnight. Moreover, pick brokers who have less slippages because big slippage can mess up your trades. Here are the most suitable forex brokers for day trading:
3. Swing Trading
Unlike Day Trading, Swing Trading is a form of trading that holds orders for a few days or even weeks. Traders who choose this strategy often rely on technical analysis or Price Action to find a nice entry point, giving a good R:R ratio. The order will automatically close based on the pre-set SL and TP levels, so Swing Trader usually does not take too long to monitor and manage orders.
How does Swing Trading work?
When performing Swing Trading, Swing Traders will apply 4 popular trading strategies including:
- Reversal Trade: Trade a reversal based on a change in price momentum. A reversal is a change in direction from the trend of the current asset price. Example: While the price trend is up, the price loses its momentum and gradually goes down. This reversal can be either positive or negative for several days.
- Pullback Trade: This is a short reversal trend trade and then re-enters the trend. The reversal is quite short, so sometimes it is difficult to notice. Therefore, this type of trading requires advanced analytical techniques.
- Breakout trading: This is a trading method where the entry will be in the direction of the price just broken. A breakout is a break in price from a price pattern, support or resistance level. With this entry method, the level of risk will be much lower than with other methods.
- Breakdown trade: For this trade you will choose an entry point before the Breakout price. Just like the Breakout trade, this trade also has a fairly low level of risk.
It can be seen that Swing Trading's trading strategies are quite simple, using not very high analytical techniques, easy to apply for new investors or have little time to analyze the market.
The best brokers for price action strategy
So you can see that price action strategy is all about indicators. Therefore, the best forex brokers for this strategy is the one with platforms that allow you to use as many indicators as possible. Here are the top forex trading platforms for price action strategy:
4. Position Trading
Position Trading is a form of transaction similar to stock investment. Accordingly, traders will hold orders from a few weeks to several years.
When choosing this strategy, traders often combine technical analysis and fundamental analysis to make decisions. They will ignore small fluctuations in the short term and head for the long term trend. Therefore, Position Trading requires a large amount of capital and must have perseverance.
The best brokers for swing strategy
You need many good indicators for swing trading strategy. The only way to do that is to trade with brokers who have advanced and modern trading platforms. Here are the brokers who have a variety of forex indicators on their platforms:
5. High-Frequency Trading
High-Frequency Trading is not too popular, but I still want to introduce you to the basics and full of strategies. Accordingly, when choosing this trading strategy, traders will use complex algorithms to analyze the market.
This is the strategy mentioned in Michael Lewis' book "Flash Boys". However, now it is no longer popular and rarely applied.
Which professional trading strategies are right for you?
To choose the right trading strategy, it is necessary to consider your personality, time conditions and the amount of knowledge you have.
- Position Trader will take a few hours/week to analyze and plan to enter the order.
- Swing Trader takes about 1-2 hours/day to manage orders.
- Scalp Trader will need to spend all day analyzing and entering orders.
Besides, it is necessary to consider the level of risk tolerance on each trading order. Because Scalping loses, the number of pips will be lower than Swing Trading and Position Trading. You should consider, try and choose the method that works best for you. Limiting the constant change of trading methods will not lead to long-term effects.
When to change trading strategy?
Trading strategies may need to be changed as needed. That's when you find it no longer relevant, low R:R ratio, causing psychological stress in the trading process.
If you don't know why the trade won or lost, do not anticipate the risks and have scenarios when the market changes, then it is time to rethink your current strategy. Trading is a long-term job, needs perseverance, perseverance, seriously learning and improving those professional trading strategies everyday.