You will be identified from other traders by your portfolio of forex trading strategies. Seasoned forex traders also understand that focusing on a single strategy will not always result in the greatest number of profitable trades.
As we enter the year 2021, we’d like to highlight 6 of the most profitable forex trading strategies. Remember that you’ll only be able to become a successful trader if you can apply and adapt these strategies to the current market conditions.
1. Price Action Trading
One of the most popular forex trading strategies is price action trading. It’s also a simple and effective way to gain an advantage in the forex market.
After studying historical forex price movements, the trader formulates a technical strategy in the price action trading system. The most commonly used indicators are price bars. Price movements, as well as support and resistance levels, can often provide important clues as to where the market is likely to go.
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Jesse Livermore, a legendary trader who was worth more than $100 million in 1929, used price action. “When it comes to markets, something that happened in the past is bound to happen again,” Livermore says, “because humans drive the market, and human nature never changes.”
To analysis and predict forex market trends, all price action traders use raw price data. However, there are a variety of price action strategies to choose from, each with its own set of advantages and disadvantages.
- It’s a tested strategy.
- For trending and range-bound markets, it provides near-accurate, profitable, and relevant signals.
- It’s simple. As a result, understanding when to enter the market is simple, and you won’t have to deal with several technical indicators.
2. Range Trading Strategy
The forex market does not always show a clear trend. Forex markets trade in a range about 70% of the time. When the market moves consistently between two prices over a set period of time, this is known as a range trading strategy in forex. It can occur in all time frames, both long-term (e.g., daily and monthly charts) and short-term (e.g., intraday and daily charts) (e.g., five-minute charts)
As a result, depending on the current price position within the range, a trader can go long or short in range trading. To trade, a trader must first increase the value in which they want to trade. This is best achieved by identifying areas of support and resistance.
The trader then searches for an ideal entry position based on whether they want to go long or short. To confirm market conditions, other indicators such as the RSI (Relative Strength Index), CCI (Commodity Chanel Index), Stochastics, oscillators, and others can be used.
3. Trend Trading in forex
In forex, the trend is your friend as long as you use it to your advantage. The overall direction (up or down) during which the price is moving is referred to as trend trading in the forex market.
Uptrends, according to Dow theory, occur when a series of higher highs precedes a series of higher lows. A downtrend, on the other hand, is classified by a series of lower lows followed by lower highs.
All markets, including currency markets, can be predicted to some degree. As a result, experienced trend traders apply a number of indicators to determine and analyses the direction of forex market momentum.
These traders can then forecast what is most likely to happen and change their forex trading strategies accordingly.
It’s simple to identify a trend, and the size of the trend doesn’t always matter. To profit from trend trading, however, it’s best to enter right at the start of a trend or shortly after it begins, rather than when the trend is about to end.
4. Position Trading Strategy
One of the forex trading strategies that only works for super-patient, long-sighted traders is the position trading strategy.
A position forex trader keeps his or her position for a longer length of time. It’s possible that the holding period will last several weeks or even years. The trader hopes to profit from any strong pricing trends that occur by entering and remaining in the market for extended periods of time.
Position traders look for long-term trends that can last weeks or months. Minor, transient price fluctuations or pullbacks are unimportant to them. Instead, they concentrate on the majority of a current trend.
Position trading in forex can be approached in a number of ways. While some traders prefer currencies with a strong trend, others prefer currencies that haven’t yet started trending but have the potential to trend strongly.
As a result, for the most part, position trading entails detecting and anticipating trends. A position trader may use chart patterns, fundamental ratios, technical indicators, news catalysts, and other indicators to achieve this.
5. Forex Day Trading Strategy
The majority of newbies to forex trading gravitate toward intraday trading. Opening and closing positions on the same trading day is what a forex day trading strategy is all about.
A day trader can use a wide range of other forex trading strategies to maximize profits from price fluctuations that take place during intraday forex trading. As a result, day trading isn’t the only type of trading. A day trader can switch between hundreds of different day trading strategies, such as scalping and position trading.
Day traders must invest a large proportion of their capital in addition to having a detailed analysis of the product and the currencies they trade if they are to be successful.
Besides this, because of their high trade volumes, major currency pairs are commonly the best markets for day traders.
6. Scalping in forex
Take into account scalping to be a quick, action-packed thriller that keeps you on the edge of your seat! Forex scalping is just as intense. Scalping is one of the few forex trading strategies that allows you to remain profitable at all times by benefitting small profits whenever the market is beneficial.
Also during forex trading day, a scalping trader tries to grab a small number of pips as many times as possible. He/she fulfils this by opening and closing several times throughout the day. Because a scalping trader only holds a position for a few seconds or minutes, this is possible.
Scalping requires quick thinking as well as deep focus. During the trading period, for example, one must remain glued to their charts and closely monitor their scalping indicators.