This work will expose you to the various trading strategies used by investors to capture the latest market movements and benefit from them while using the social trading broker or any other trading platform.
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What are the most popular forex trading strategies today?
The forex market often appears to be a maze. Hence to succeed in it traders often developed different trading strategies to guide them in taking decisions on when to enter and exit the market. Some of these strategies employed by traders have been discussed below.
- Scalping Strategy: Scalping is one of the most popular trading strategies used by traders today. This trading strategy aims to catch every market movement and make profits from them. Scalping involves taking a short-term position in the market and exiting the same position within the lower timeframe (1-30minutes). Often scalpers paid great attention to the candlestick patterns. They combine the previous and new candlestick patterns formed, to predict the next market direction within the next five to ten minutes. Scalpers are known to enter the largest amount of trades daily.
- Day trading strategy: Day trading is one of the strategies used by investors who have other engagements during the day. Here, the investor analyzes the market at the beginning of the new day trading session and makes his forecast for the highest or lowest level the market will likely create during the day. He, therefore, proceeds to take positions in the market using these forecasts. Day traders often make use of the daily timeframe to analyze the market and take positions.
- Swing trading strategy: Swing traders are positional or long-term traders. These set of traders tend to hold their positions over a long period till their target is achieved. Often swing traders could hold their positions for days or even up to a week before closing them.
- Pullback strategy: Pullback strategy is a very popular strategy used for trading highly volatile assets such as XAUUSD, BTCUSD, EURUSD, etc. Here, the trader stays off the market and waits for a long pullback to step in. The idea here is that the market always absorbs the loss after every massive pullback. Hence, pullback traders wait to buy early after each massive fall. They usually exit after the retracement and await the next pullback.
- Breakout strategy: The breakout strategy is used to capture the new market trend whenever the market is set to change its trend. Often, the market could range at a particular zone for long. A breakout of that zone usually signifies a change of trend. It is this new trend that traders try to capture early enough by using the breakout strategy.
- Price action trading strategy: Price action is an important trading strategy that involves observing how the market reacted at certain levels in the past, and then using it to predict future price reaction when the price gets to such levels again. Price action traders often paid great attention to the various support and resistance levels and how the market reacts in these regions. An important phrase used by traders to summarize the concept of price action is “trade what you see”.
- Fundamental trading strategy: Fundamentals refers to important news, especially economic data that bears a large impact on the market. Traders who trade fundamentals wait for the release of important economic news that moves the market so much, such as NFP, FOMC, Inflation reports, Interest rate hikes, etc. They usually study the way the market has reacted in the past to this news and use it to predict the possible reaction at present.
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