The main Forex players are usually financial institutions. For example, they can be banks, hedge funds or fund managers. A relatively small portion of Forex volume is taken by individuals. They are also called retail traders because they use Forex to make money from trading.
Currency trading is extremely important in today’s world. In fact, it helps shape businesses, which has effects on the global economy. But to benefit from currencies, you have to apply the right strategy. How to choose it? Let’s consider some of the best options.
If you are looking for a simple yet reliable approach, you should give Trend Trading a try. As you can tell from the name, this method forces you to trade in the direction of the existing trend. By the way, trends can be easily defined by the best forex EA 2022 or the so-called expert advisors. It is easy to use them and with their help you can analyze not only the direction of the trend, but also its duration as well as its strength. All you need to know with this strategy is when to exit your current position so that you can lock in the profits made and limit your money losses.
In Position Trader, you will have to maintain your position over a long period of time. Depending on the market situation and your skills, this can range from a few weeks to 2-3 years. It is therefore a long-term approach that requires a macro vision. With Position Trading, you have to ignore the small fluctuations that occur in the market. This approach also relies on analytical data, such as moving averages, as it helps determine the best entry and exit positions.
With this method, you have to consider support and resistance. Their levels are basically the higher and lower ends that the price of the currency reaches before going in the opposite direction. Together, these two elements form what is known as a bracketed trading range, which is why this approach is called Range Trading. And what tools are needed to implement this strategy? You need to apply the RSI and a stochastic oscillator to set some overbought and oversold conditions.
As said above, Forex is linked to the global economy. The currency is largely influenced by the global economy. This is why it is essential to understand economic news and the impact it can have on currency pairs. With the News Trading method, you can predict both daily market moves and breakouts. In this case, you are supposed to rely on economic calendars and indices. For example, you should consider the ICC or Consumer Confidence Index as it defines which direction the price will move.
This approach emphasizes short-term price spikes, so it is a trending strategy that follows frequent price changes. Of course, small fluctuations can go against large trend directions. This is why Swing Trading requires limited vision. You can examine the forex market hourly or daily instead of analyzing general trends. In addition, you must act quickly. By the way, traders also need to hold their position overnight to benefit from trading.
It is one of the most popular strategies used today. Scalping is ideal for those who are not ready to take big risks. With this approach, you will need to perform continuous analysis of price movements. Scalpers buy and sell currency pairs to reduce small profits from each trade. To this end, they rely on the spread and work with brokers to gain access to lower spreads. They must also use special tools to perform technical analysis and recognize patterns, while taking into account economic events.
So what is the best forex strategy? It is difficult to give an answer that is universal for everyone. In this article, we’ve looked at some of the best approaches you can try today. It is up to you which method to choose when using Forex. Above all, think carefully about your needs. I hope this article will help you succeed in trading.