Successful forex trading requires a strategy – it’s your detailed plan of action. A strategy determines how you identify entry and exit points. Traders should stick to their chosen framework for consistency. Discover the most common systems used in South Africa.
1. Follow the trends
The prices either move within a range or form trends. The latter start when the exchange rate crosses its support (to go higher) or resistance (to go lower) areas. This allows the market to hit new highs and lows. If you keep an eye on such trajectories, you can make profits under relatively stable conditions.
When the resistance is broken and the price begins to fall, some traders will go short for fear of greater losses. Buyers, on the other hand, are delaying operations in the hope of getting an even lower (and therefore affordable) price. These two feelings are watched until the market hits its bottom – i.e. H. Again begins to rise. Confidence in the instrument is gradually being restored.
This describes a typical trend following strategy. Long positions are opened after the support is crossed, registering a new low. Short positions are initiated when the resistance is broken as the market makes a new high. You can get free advice from the global ForexTime broker on this and other popular types of FXTM forex strategy.
Trend following requires a specific arsenal of tools – in this case technical indicators. You can pretty much spot the start of a trend. It’s known as the breakout point. Of course, the price can leave the range and come back quickly. There is no way to know for sure if you are considering starting a new trend. However, trend following is still one of the most successful approaches. Trends can be permanent and extreme, which works to your advantage.
2. 4 hour forex trading strategy
As a variation on the swing strategy, this method is based on two types of MAs (moving averages). The trader applies these indicators to a 4-hour basic chart to identify entry and exit signals. However, the actual trades are opened and closed using a different (1-hour) chart. The latter always has a shorter time frame than the basic diagram with a gap of at least 1 hour.
One moving average describes 34 days, while the other reflects changes in a 55-day segment. Both must move in the same direction to warrant a long or short position. For example, if the price falls below the indicator lines with a 34-day MA below the 55-day MA, there are reasons for a long position (buy). The market has hit a new low. On the other hand, if the price move is above both MAs and the shorter one is higher than the other, then the sale is reasonable.
3. Counter-Trending Forex Strategies
Traders can also move against the trend. It makes sense if they suspect an outbreak is wrong. It is suggested that the price quickly return to its range so that no sustained trends develop. Indeed, the exchange rate may bounce off its new high or new low and the same resistance and support will continue.
This strategy is based on the analysis of both levels and requires strict risk management. It is suitable for both stable and volatile markets. This also means that traders watch the market closely as unexpected changes are always possible.
How to choose a strategy
There are many other popular strategies that go beyond trend following and the countertrend approach. Unfortunately there is no universal recipe for success. Because of this, forex traders need a balanced combination of analytical skills, foresight, and emotional control. You can test any new strategy in the demo mode of your digital terminal.
It is impossible to understand which strategy will suit you right away. Some traders prefer to wait for breakouts while others rely on ranges. In either case, be attentive and follow your decisions with the help of a trade journal. Periodically evaluate the results to see what works and what doesn’t. Every decision puts your capital at risk, but is it always justified?
In 2021, traders will have dozens of technical indicators. There is no shortage of online teaching material. It comes in the form of books, articles, blogs, podcasts, and video tutorials created by brokers and prominent traders. Make use of this abundance.
Beginners should stick to the most popular strategies and start small. It is important to measure risk carefully and never to risk more than 1% of the capital per trade. Leverage should also be avoided until sufficient experience is gained. Gradually you build up your own competency so that you can try more complex methods. However, at some point you can find that less is more.
How Many Forex Strategies Are There?
There are four main types of forex trading strategies: scalping, day trading, swing trading, and position trading. Different trading styles depend on the time frame and duration of the trade.
What is the best scalping strategy?
Best scalping strategies
- Stochastic oscillator strategy.
- Moving average strategy.
- Parabolic SAR indicator strategy.
- RSI strategy.
What is the Best Time to Frame Forex?
For some forex traders, they are most comfortable trading the 1 hour charts. This timeframe is longer, but not too long, and the trading signals are lower, but not too weak. Trading during this period helps to have more time to analyze the market and not feel so rushed.
What is the best indicator for Forex?
Let’s take a look at the Top 10 Forex Indicators Every Forex Trader Should Know.
- Moving averages. The concept of the moving average is very important that every trader should know. …
- Relative Strength Index. …
- MACD. …
- Bollinger Bands. …
- Stochastic. …
- Ichimoku Kinko Hyo. …
- Fibonacci. …
- Average true range.
Which Strategy is Best for Forex Trading?
Top 8 Forex Trading Strategies And Their Pros And Cons
- Price action trade.
- Range trading strategy.
- Trend trading strategy.
- Position trading.
- Day trading strategy.
- Forex scalping strategy.
- Swing trading.
- Carry trade strategy.
How Do You Lose Money In Forex?
Main Reasons Forex Traders Fail and Lose Money
- Overhanding. Over-trading – either too big or too often – is the number one reason forex traders fail. …
- Do not adapt to market conditions. …
- Bad risk management. …
- Having no trading plan or not following it. …
- Unrealistic expectations. …
- In total.
Can I become a millionaire and trade forex?
Forex trading can make you rich if you are a hedge fund with deep pockets or an unusually skilled forex trader. But for the average retailer, forex trading cannot be an easy path to riches, but rather a rocky path to enormous losses and potential misery.
How do I get 50 pips a day in Forex?
The whole idea of the 50 pips forex trading strategy is to capture only 50% or 33% of the currency pair’s daily range movement. And usually the best times to do this are just before the London Forex session.
How much are 100 pips worth?
Hence, for a position of this size – 10,000 units – we gain or lose $ 1 for every pip move in either direction. So if EUR / USD moves 100 pips (i.e. 1 cent) in our direction, we will make a profit of 100 USD. We can do this for any trade size. The calculation is simply the trade size multiplied by 0.0001 (1 pip).
How many dollars is 50 pips?
However, if you want to trade, you should know a little about how it works. In GBP / USD, a pip is the fourth decimal place, 0.0001. So if you enter long at 1.6400 and the rate climbs from GBP / USD to 1.6450, you have made 50 pips, or 0.0050.
How can I make 1000 pips a day?
No, that is not possible in any way. For 1000 pips a day, you have to open many, many trades in different pairs. Or many trades with a single pair. Trading is about how well you handle your risk.
What is the Easiest Forex Strategy?
When it comes to forex trading for beginners, the Pin Bar is king. This is because it is a very obvious pattern that makes it easy to identify on a diagram. It’s also one of the easier trading strategies. Notice how the market encountered resistance during a rally but was soon able to break through that resistance.
How can I learn forex strategy?
So be patient; In the long run, a good forex trading system can potentially make a lot of money.
- Step 1: timeframe. …
- Step 2: Find indicators that will help you spot a new trend. …
- Step 3: Find indicators to help CONFIRM the trend. …
- Step 4: define your risk. …
- Step 5: Define Entries & amp; Completed.
How do you identify pips?
The movement of the exchange rate is measured by pips. Since most currency pairs are listed with a maximum of four decimal places, the smallest change for these pairs is 1 pip. The value of a pip can be calculated by dividing 1 / 10,000 or 0.0001 by the exchange rate.
What is the easiest trade?
Here are the best online stock trading sites for beginners:
- TD Ameritrade – Best overall for beginners.
- Loyalty – Excellent research and education.
- Robinhood – Easy to use but no tools.
- E * TRADE – Best web-based platform.
- Merrill Edge – Great Research Tools.