Trading in the foreign exchange market refers to forex trading. Forex trading is one of the most popular ways of trading in financial markets. It refers to trading in foreign currencies using the listed currency pairs. There are many global factors that affect the exchange rates of the foreign exchange market. Several strategies are developed which can assist you while trading in forex.
Who are Forex Traders?
A forex trader is a trader who trades in foreign currencies. If you also buy and sell currencies you are also a forex trader. Trading in forex is carried out using listed pairs of currencies over the foreign exchange market. In forex trading, there is always involvement of two currencies because one is bought and on the other hand another one is sold.
Forex Currency Pairs
A currency pair is used to indicate the exchange rate of the currencies listed on the foreign exchange market. Two currencies quoted in currency pair are known as a base currency and a quote currency. For example, in the currency pair of EUR/USD, EUR is the base currency and USD is the quote currency.
A rate quoted against a currency pair indicates, how many units of the quote currency can be bought from one unit of the base currency.
What is a Forex Trading Strategy?
Determining when to buy or sell a respective currency pair is known as a forex trading strategy. Every strategy is based on some analysis whether fundamental or technical. A trading strategy is one, which allows traders to analyse the risk and opportunities of the market. It helps you to take actions confidently and execute trade orders.
Profitable Forex Strategies
Forex trading requires effective strategies that can be used to fetch profits. If you are new to forex trading then you need to analyze the market and understand the factors on a higher level. There are simple trading strategies for beginners. Forex strategies can assist traders in making better decisions. We have several trading strategies that work great and are proven. By studying these strategies you will be able to take better decisions and trade with confidence.
Day Trading Strategy
Day trading refers to buying and selling a currency within the same day. This means, before the closing of the market you have to sell your holding back in the market. Day trading strategies are beneficial when you are expecting a big change in the exchange rates of any currency. A day trader refers to a person who actively trades in forex using the trading strategy.
A day trader can invest in multiple options for a day. Usually, the duration of day trading stays between a few minutes to a few hours. Day trading has a higher number of trading opportunities. Day traders have to study the factors of the market in-depth and have to invest a lot of their time. Day trading strategies are based on strong reasons for appreciation in the prices.
Price Action Trading
The price action trading strategy requires studying historical price movements to develop a trading strategy. Price action is a strategy that can indicate prices with better indicators. In price action trading, there is no duration or length of trade. It can vary from short to long based on the analyses. Traders need to determine the entry and exit points that can be most profitable.
You need to analyse multiple possibilities using the price action trading strategy because you cannot rely on a single possibility.
Swing trading does not require any technical or fundamental analysis because it is based on speculation. Swing traders take advantage of the price movements that are going on in the market. If you are also a swing trader then you should not hold your positions for long-terms because this trading strategy is generally traded for fewer days.
The strategy of swing trading depends on your trading style because it does not have any set of knowledge and require analysis of support and resistance levels. Therefore, after analyzing the moving average you can predict when to buy and sell your holdings. This is a forex strategy that is practised by many traders for profit-making.
Position trading is based on fundamental and technical analysis and generally focused on long-term trading. Minor changes in the exchange prices are not considered in position trading. This strategy can be used for trading in other financial markets also along with forex trading. Position traders generally focus on longer terms such as weeks, months, or years.
It requires studying every factor that can affect market conditions such as political, economical, international trade, and others. The entry and exit points are determined based on the factors and technical analysis that have been made by you. The trading opportunities are lower with this trading but require a very low investment of time and studying support and resistance level.
Range Trading Strategy
Range trading includes trading around various key levels and the level are analyses after a technical analysis. The length of trade depends on the strategy and the time period studied, which means it does not have any specific time frame. This trading strategy works well in the foreign exchange market. Traders can use market moves for better prediction.
Trading strategies like range trading requires a lot of time investment and you should keep an eye on the resistance levels. The number of trading opportunities is on the higher side. The best part is that it is beneficial for the long-term as well as short-term.
Carry Trade Strategy
Carry trade strategy refers to borrowing one currency at a lower interest rate and investing other currency at a higher investment rate. The profit arises from the difference between the borrowing rate and the investing rate. Several traders use this trading strategy as it has a low risk of investment. It is one of the most popular trading styles used in the forex market.
The duration of investing and borrowing money is similar and generally higher like weeks, months, and years. It does not require much investment of time but the trading opportunities are limited.
Trend Trading Strategy
Trend trading strategy is nothing but studying the trends of the market or the support and resistance levels. Trend trading can yield positive returns by studying price movements. The length of trade using trend trading can vary from medium to long-term. The entry and exit points are determined on the basis of the trend with higher expectations.
Trend trading has a higher number of opportunities and also requires a long investment of time for market studying. It requires technical analysis of the forex market. Forex strategies like this can generate higher profits.
Forex Scalping Strategy
In the forex market, scalping refers to making small profits from the opportunities analysed by forex traders. It involves plotting your money at comparatively safe places as compared to other forex trading strategies. Traders can perform scalping with the help of algorithms or manually with their analysis.
Traders can use this forex strategy as it has many opportunities for forex trading. The length of the trade is usually low with scalping trading style and the entry and exit points are determined with the help of support and resistance levels.
These are the best forex trading strategies that can be used in the forex market. The strategies discussed are proven and result-oriented. If you also practice forex trading then you should study these strategies.
Forex Trading Provider You Should Consider
Forex trading strategies come with a high risk that you can eliminate using reliable forex trading brokers. Invest your money safely with these brokers, we have a list of providers you should consider:
Brokers are also offering educational materials that are based on fundamental analysis and result-oriented trading strategies that work. These brokers are also offering high forex trading leverage. The main problem is that retail investor accounts lose money with higher leverage. Leverage increases the amount of profits but also increases the amount of loss also. So, the risk of losing money is also on the higher side.
What are Support and Resistance Levels?
Support and resistance are two different levels of the exchange prices that indicate the performance of the market. The support level is the point where the continuous falling price starts to increase. On the other hand, the resistance level is the point where the continuously increasing price starts decreasing. Trading techniques study these levels for better decision making.
How to study Price Movements?
The candlesticks chart can be used to study the price movement of a specific currency pair. You can choose the option for how long you want to study the chart. It is available for both the long and short term. By studying the charts you can predict the future possibilities of the exchange rates. Do not take the high risk of losing money and utilize each opportunity available.
What is Buy Signal and Sell Signal?
A buy signal indicates the condition or level at which a trader is alerted to buy a specific investment. On the other hand, a sell signal is a level or condition when a trader is alerted to sell a specific holding. These type of signals can be generated through several indicators technical or fundamental. A signal for buying is conveyed to fetch more profits and a signal for selling is conveyed to stop loss.