Forex traders from all over the world use different trading strategies to help them in determining the best times to buy and sell currencies. A strategy also helps in determining the trading entry and exit points. In Australia, many traders and analysts work endlessly to improve the existing strategies in order to come up with better methods of understanding the market trends. Below are the most common trading strategies.
Trend trading
One of the most popular trading strategies is trend trading on small business. The strategy revolves around identifying the movement of the market trends in order to choose the entry and exit points. Traders use different tools to help them in evaluating the trends.
Some of the most popular tools are volume measurements, moving averages, stochastic, directional indices and relative strength indicators. Forex trading platforms such as Saxo UK can give you a guideline on the best tools to use for trend trading.
Day trading strategy
Day trading simply means trading within a single and specific market in one session. The strategy sets opening and closing rules for trading positions. The main agenda for the day trading strategy is ti catch the opportunity for a potential end and to know when to exit at the right moment even before the end of the session. Day trading strategy requires discipline because any step outside the set rules could see you losing everything.
Swing trading
Swing trading refers to a trading strategy where a person buys or sells currency, using indicators that show the price movements. The strategy does not have a limited period and can go from days to weeks. Swing traders rely heavily on technical analysis to track the currencies in order to know when a swing is most likely to take place.
What this means is that swing traders focus more on the dips and peaks in momentum rather than the long-term value of the currencies. The strategy may look easy on paper but it one of the most risky trading approaches to take. Besides this, it is also one of the most flexible strategies because traders do not have to hold any long-term approaches to their trading.
Scalping
Forex scalping is another popular strategy where traders make trades within very short periods. In most cases, scalping takes between three to five minutes in which the traders make small profits. The most important key to successful scalping is consistency. The main advantage of the strategy is that the risks involved in staying for long in the volatile forex market is minimal.
It is however not a suitable trading method for everyone because of the small margin of profits. The strategy takes only a few minutes to accomplish but is time consuming for those that are not full time traders.
Range trading
Range trading is one of the simplest strategies in the market and traders can implement it at any time during their trading sessions. The strategy involves identifying oversold and overbought currencies during support and overbought periods. It comes in handy mostly when there is no feasible direction in the market.
The strategy is however at its lowest when the market is trending. There are different kinds of ranges in the market and any trader that wants to pursue range trading must identify the range they want, the types of ranges are irregular ranges, rectangular ranges, continuation ranges and diagonal ranges.
Position trading
Also known as buy and hold trading, position trading is another strategy that involves taking a stand on currency pairs expected to trend. The traders that go into position trading do not care about price fluctuations or pullbacks but only care about capturing the majority of the trend.
One of the advantages of this strategy is that traders do not have to spend much of time watching the market trends as they only monitor the chances of significant changes and only cash in on that. They also make fewer trades than those that use other strategies.
Wrapping it up
Different traders use many other forex trading strategies. Choosing the right strategy is important because it may make or break you. All the strategies are different and it is not easy to tell which one is the best as different people have their own preferences.
