Forex Trading Strategies

In trading in the forex market, a trader must use a set of strategies to get ahead of the game and avoid further losses. The following is the list of basic tactics most traders use to make more profits in forex trading.

Two Basic Forms:

1. Long Trade – traders would bet that the price of a currency pair would rise in the future, and they would profit from it.

2. Short Trade – is the opposite of the long trade. It is a bet that the currency duo’s price would fall in the future.

Four Basic Types:

1. Scalp Trade – in this strategy, you as a trader should hold your position for a short period of time, such as seconds or minutes, and the amounts of profits you would get are limited in terms of the number of percentage in points (pips). This trade is supposed to be cumulative in a sense that a small profit created in each individual trade is being added up to a huge amount at the end of the day or your preferred time period. Using this tactic, you need to rely on the predictability of price swings, but this strategy is cannot handle volatility. Hence, you must restrict your trades to the most liquid currency pairs and do your positioning at the busiest times of trading during the day.

2. Day Trades – these are short-term trades in which your positions are carried and liquidated on the same day. The duration of using the day trade strategy could take up to hours or at least minutes. If you would like to be a day trader, you need to equip yourself with technical analysis skills and knowledge about important technical indicators to maximize gaining profits. In comparison, the day trade tactics also rely on gradual gains throughout the day, just like scalp trades.

3. Swing Trade – in this strategy, you as a forex trader need to hold your position for a period longer than a day or 24 hours. For instance, you could confine your trading position for a couple of days or even weeks. The swing trade tactic is very useful during major announcements by governments or at times of economic commotion. Since you would have a much longer timeline using this strategy, you are not required to monitor the markets throughout the day. As a swing trader, you should have a deeper understanding and always be updated with economic and political developments as well as their impact on the movement of currency, in addition to technical analysis.

4. Position Trade – using this strategy, you should hold your position on your chosen currency pair for a much longer period of time that could last for as long as months or even years. This type of trading tactic requires more fundamental analysis skills since it provides a reasoned basis for your trade.

Other Forex Trading Strategies:

Some traders are using strategies that are based on the broader area of technical analysis, such as breakout and moving average, to calibrate or polish up their trading approach even more.