Forex is one of the most volatile and liquid markets in all the markets. The market is responsible for more than six trillion dollars traded in deliverables every day. There is plenty for everyone in the forex market. We will be learning about best trading strategies forex and make money using the different strategies.
Almost everyone does trading in the forex market; they just know it or have not noticed. When people travel to different countries, they have to exchange their currencies with the ones prevalent in their own countries. The base to charge the money is the exchange rate. With the help of that, the travellers make their way into a different country.
When business is associated with this idea of exchange, money comes in. Traders trade in different lot sizes to make money.
There are primarily three sizes that are prevalent in forex trading—standard micro and mini. For every lot, the profit is calculated in pips and pips are directly related to the fact that how much the concerned pairs are moving.
The fact that there are instruments like leverage present in the market, there are rare chances that the traders do not make money in it.
Lets learn about about leverage in detail below:
Leverage is the borrowed money from the broker. Just like while shorting, the traders have to buy back the shares that they bought from the broker. While using leverage, the traders have to pay back the money to the broker that they asked. This Is how it works.
When the traders exercise leverage, they ask the broker to help them enter the otherwise inaccessible position due to the constraints of their personal capital invested. The broker then allows them to enter a larger market. The catch here is that where the trade goes wrong, the traders have to pay back the amount of money that the position was worth, not the one used to enter that position.
Understand it this way:
If the trader exercises leverage of 1:50, he or she is entering the trade worth $50 with just $1. That can happen with $10 as well, and the traders can enter the trade worth $500. When they enter that position and when they lose it, the amount payable is $500, not $9.
If the trade goes right, then everything is well and good. Leverage is one of the most used instruments in forex trading and can also be called the zero level of trading strategies forex. Every trading strategy you read from here on can generate better results with the help of the correct and calculated use of leverage.
Now let us read about the Best Trading strategies Forex:
Scalping: prominent forex trading strategy
The traders who prefer small but a lot of results in a positive sense should opt for scalping as the preferred trading strategy,
As the snake suggests, Scalping is mostly about scraping each and every bit of profit that can be made from an asset. The best profit is made in the shortest duration of time in terms of entry and exit.
The more you hold, the more chances of making money there. But if you enter and exit very soon., probably in minutes and even seconds sometimes, the profit potential increases with the decrease in the holding time. Since the trades are held for a smaller duration, numerous trades can be made.
An increased number of trades with a lesser potential of profit can be the best for traders who are looking to trade in the short term.
Day Trading: one of the most sought after trading strategies forex
If you are not comfortable with the scalpers’ speed executing their trades, the day trade will suit you better. The trades are made, and the positions exited on the same trading day. That is what day trading is all about. The traders buy different stocks and then sell them before the day ends; if they want to hold the stocks for one or more days while they trade intraday, then they have to pay an overnight swap fee. That money should not concern you that much.
Day trading in forex is also quite possible in fact; each pair has a different volatile period throughout the day where it can generate the best results. For example, the USD JPY pair can be traded for a good result during 1200-1500 GMT hours.
Day trading needs ample research and a proper window to execute the trades.
It also needs a good understanding of how well the economy is going on and how the recent events turn good or bad for you. If any big news is about to hit the market, it can affect your positions that day.
The idea behind this trading is that the value of the investment will grow over the long run.
These are two basic strategies for forex trading. Now let us look at some better forex trading strategies.
Many traders believe that the price levels that were important in the future will also be significant in the future. The reason behind the belief is simple logic that if the market drops to a certain level and then bounces back, that makes it a good support level for buying. If the forex pair falls down to a specific level, then that could create a good trading opportunity for forex traders.
Running out of steam:
This is very similar to the times when the traders analyse the support levels. The forex traders are also used to testing the resistance levels. That is a point when the market came back from its previous peak, and then it just rallied down; if the market is in an uptrend and suddenly begins dropping, The market psyche is that the buy price is becoming too much for everyone.
The idea here is to find the forex pair that has just been to this point. This can be located near the previous highs and lows. The traders look for such pairs and short-sell them in hopes of earning profits when they buy back the same pair as the prices reach where they desire.
All these strategies that are based on the highs and lows of the chart, they can make risk management pretty easy and straight; for example., if the traders are looking for a bounce off level, Then the stop loss can go lower than the previous point if they are looking to even short sell them. Then too, a lot of traders will sue the previous high as a point for their stop loss.
Breakout is one of the most talked-about almonds and also one of the most used trading strategies forex in the market. Breakout trading is done at a point of a breakout. Breakout is when the price suddenly reverses back, clearly opposing a trend and then the opposite trend begins. This is a point when the traders have to decide whether they have to be long or short. Even the decision needs a lot of care to execute.
This is also because of the fact that there are a lot of different events that mimic the breakout and if the traders make their trading decisions thinking that this is a breakout and it simply is a market correction, then the money is for sure bound to fall.
This Strategy can be used to ride the wave of hype that a particular trend is about to create. When that hype is completed, everyone is for sure about to ride it, but what is better than scraping profits before everyone else and a lot of bigger and better numbers?
Oversold and overbought:
All the trading strategies forex discussed until now are based on charts and chart patterns, plus the optimal and correct use of support and resistance levels.
This one uses math as its base of logic. A term called the RSI (relative strength index). RSI is something that belongs to the oscillators o]pool of trading tools.
When the RSI crosses the 70% level, the market is thought to be overbought.
This is also the time when the traders will react to the news and begin selling their positions, and as a result, the market is again even after a point of time.
Oversold is the point when the RSI goes below 30%. The traders need to watch this very closely, and as soon as the market turns up again, they should make the buy calls.
Price action trading:
When the traders want to eliminate the points like economic news and indicators out of their research, they can go for price action trading. This Strategy asks the trader to read the candlestick patterns and then use them to identify the entry and exit positions.
Generally, this Strategy is used as a plus one to any other trading strategies forex because this is something that will be of use only when it is added with something much more robust. It is the holy water to demons, but you do need silver bullets to kill them entirely.
The things that traders consider while they use this Strategy are highly subjective, but nevertheless, a lot of other thighs have to be accumulated before the traders use the price action. Some might look at an event as the beginning of a trend, while others may see it as a correction. Both may be wrong and correct at the same time. What matters is who uses the math and the calculations in a better sense.
Trading in forex is a big-money game. First, make sure you have the correct capital and all the right intentions to enter the market. If any of these things go wrong, then you face trouble. All the forex strategies work for traders who put their heart and soul into their work and do not blindly follow what they hear in the market.
Make sure that the trading strategies forex you use are working for you because they are like wands for wizards. The wands choose them, not the other way around.
Frequently Asked Questions:
How do I begin trading?
To begin forex trading, the first thing you need is a trading account. Don’t worry about that because we have you covered. We recommend you the leading online broker HFTrading, the broker that operates in Australia and New Zealand. HFTaring is a trading name for the CTRL investments Pvt. Ltd and the parent firm is regulated by CySEC (Cyprus securities and exchange commission). The traders can trade on more than 300 CFD tradable instruments with three different trading accounts via the broker.
For online trading purposes, the broker offers the MT4 trading platform. Also, the broker provides a neatly curated research and education section where the traders can read about almost everything related to trading via articles, webinars and on-demand videos.
Is forex trading Legit?
Yes, forex trading is 100% true and legit, and yes, it can generate you the profits it promises. All you need is to be in the market consistently and the proper use of the Instruments.
What are some of the other assets that are as good as forex?
Although each asset has its own advantages and disadvantages, the fact that cryptocurrencies are on the rise makes the crypto market a different option for you if you don’t want to trade in forex.
What are the risks in forex trading?
Incorrect timing and incorrect use of leverage are the only two things that traders can do wrong in the market.