Choosing a forex strategy for trading forex is obviously one of the very most important thing you can do for to ensure your overall profitability as a forex trader, you need to take a winning strategy as well. You also need to choose a forex strategy which best suits your personality and lifestyle type this not everybody is suited for the strain of high-risk or fast-paced strategies. Below I have provided a piece of advice on how you should choose your forex strategy.
Forex strategies have been developed over years to meet specific market requirements. Some forex strategies are suited to long-term investments such as bonds and corporate bonds, whereas other traders are better suited to day trades. Most traders who trade for everyday adhere to day-trading strategies, which are suited for these traders. Other traders, who deal with small amounts of cash on a daily basis would be better off using short-term strategies such as scalping. If you are planning to trade forex for several months or years, it might be best to stick to a longer-term strategy as this would minimize the risk of holding positions overnight.
A core strategy should take into consideration several indicators such as support, resistance and trend lines. Support – as mentioned earlier, this is a downward trend line on the chart which indicates that the price will likely continue on its upward course. Resistance – is an upward trend line, this shows that an upper level has been reached, the price may fluctuate in a bearish direction. Trend lines are simply drawn by connecting the lower high and lower low of a trend line, this indicates that there is strength in the trend line.
It is important to adopt a trading style according to your individual personality. Many traders follow the technical analysis, which requires quite a lot of time investment. If you are a person who does not need too much time investment, you should choose the former strategy that does not require you to constantly watch the market. If you are a person who enjoys making quick decisions and not taking too much time to analyze market conditions, you should consider implementing a scalping strategy. If you possess the temperament of a patient and logical thinker you should opt for a momentum trading strategy.
One of the easiest forex trading strategies is the simple entry and exit strategy. This is applicable to most major currency pairs. You buy at the low prices and sell them at the high prices. It is important to determine your entry points before entering the trade. If you want to trade forex safely, you should avoid entering a trade at very high prices as you may end up overleveraging risks.
Another important factor to consider is the time horizon you set for carrying trades. A shorter time horizon will increase your exposure in volatile markets. A longer time horizon will decrease your exposure. A trader with a medium time horizon will have the optimum protection against losses.
One of the best forex trading strategies is the donchian trend indicator. The donchian trend indicator is an extremely effective strategy for dealing with time cycles. The donchian trend is based on the theory of price and volume cycles. Traders adopt this strategy depending upon whether they prefer to deal in long term or short term price movements. The advantage of using the donchian trend indicator is that it can be used in any time zone.
Forex scalping is another useful strategy for all currency pairs. This strategy has to do with small price movements in very strong trends. The entry conditions for scalping are quite flexible since scalpers only enter trades when the price is close to the support line. This kind of strategy attracts scalpers because of its high volatility. If the currency pairs involved are part of a large trend, then this strategy can be highly profitable.