As one of the most exciting and dynamic markets in today’s financial world, many traders participate in trading activities. The forex market is not just about buying and selling currencies but also includes other instruments.
One can choose from many forex trading strategies to make money with. Some are simple, while others are more complex to execute. You need to understand your trading style first before using them effectively. To understand your trading style, you first need to know the trading basics.
People are captivated by forex trading due to the potential for high returns, quick returns on capital and relatively low entry barriers. Many traders who lose money do not use any forex trading strategy or use simple forex trading strategies they cannot make money with.
A simple yet effective forex trading strategy for beginners is hedging. Hedging involves taking a trade in a pair in the opposite direction of an open position to reduce risk and opportunity loss.
Scalping forex is a short-term trading method but can be profitable if done correctly. The goal of scalping is to buy at the bid price and sell at the asking price repeatedly during a concise time frame, usually 10 minutes or less when the market volatility allows it.
In momentum trading, you need to find stocks increasing in value according to your selected criteria and then use these as your basis for buying stocks. Always keep a close eye on the stock price movements to find out when you need to exit because it might have reached its peak or is starting to drop. In this case, you would want to sell as quickly as possible before losing too much.
In buy/sell trends, traders open positions in anticipation of a prolonged movement in either direction after spotting a trend reversal. This strategy can help traders take advantage of market volatility and exploit swings that can last several days or more after a sudden price change.
Fibonacci Retracement Trading System
Fibonacci retracement trading systems are used for finding opportunities where the share price has made strong moves up and down and can predict where the price is likely to go next. A high percentage of success with this strategy is achieved by setting an appropriate stop-loss or take-profit level based on Fibonacci analysis so that you know how much you stand to lose if the trade doesn’t go your way.
Bollinger Band Trading System
The Bollinger band trading system involves entering a position when the share price breaks out of one of the bands. The most popular time frame for using this strategy is intraday trading.
Relative Strength Index (RSI)
Relative Strength Index (RSI) helps traders determine overbought or oversold conditions in a particular stock or index by tracing the relationship between the size of recent gains and losses over a given time frame.
Exponential Moving Average Crossover Trading System
The exponential moving average crossover trading system uses two EMAs with different periods to enter or exit positions. A long position is opened when the shorter EMA crosses above, the longer EMA from below. A short position is opened when the shorter EMA crosses below, the longer EMA from above. This strategy also involves setting high/low price alerts so that traders are aware of when certain levels have been reached.
Why use these strategies?
Simple techniques are the most effective
The simpler the trading strategy, the better it tends to be. Only by understanding what works and doesn’t work can you develop a successful trading system that consistently generates significant returns over time.
Make trading decisions using proven methods
Many trading techniques and strategies exist and can be potentially profitable. Successful traders select which ones they use based on research and past performance of similar combinations of variables.
No need to spend hours watching the market
With so many different strategies and techniques, you shouldn’t have to watch the Saxo markets all day long. Having a system in place will automatically set up trades for you that can be monitored by keeping an eye on your trading app or platform.
Fewer trades means less risk of loss
Trading fewer times means taking fewer risks, which decreases the chance of loss. This is why it’s crucial to find a trading strategy that works well while limiting profits and losses at the same time.