With a trading volume of more than $6 trillion, the forex market is one of the largest financial markets in the entire world. This is an interesting endeavor for all those who are ready to take some risks, but it comes with many pitfalls.
If you are a novice in the field, you need to be careful about these mistakes and make sure not to commit them in the future.
One of the most important things in forex trading is finding the right trading style. Now there are many platforms like the RoboMarkets, a multi-asset broker that offers trading tips, 6 markets, and over 12,000 trading instruments to help the traders make the right investment. With the help of such a platform, you will be able to find the right strategy that fits your needs and aspirations.
But what is a trading strategy? A trading strategy can be defined as a set of rules that help the trader get insight into the trade and help them to determine when, where, and how to manage a trade. Having a trading strategy will help a trader to stay consistent and will help in understanding their performance.
If you are wondering which strategy will work for you, look into this guide and find the one that fits your trading style. You can use any of these strategies, tweak them based on your experience, and find the right one that might be profitable.
Price action trading
In this strategy, instead of considering technical indicators like RDI or MACD, the trader considers the price movements. Here, technical indicators are only used as a supporting tool, and simple indicators like moving averages are given more importance.
Price action trading is especially helpful for beginners as the charts will remain clean without multiple indicators, thus avoiding any confusion. Also reading price action can give an in-depth insight into the market which will help you identify patterns better.
News trading strategy
In this strategy, a trader tries to profit from the market movie that is influenced by major news updates. To succeed in using this strategy, a trader must know the financial market and must be aware of how they operate.
Also, this is highly volatile as the trader is trying to predict future news announcements and the market’s response based on those responses. Due to their volatile nature, they are best for trading oil and other volatile markets.
One of the biggest drawbacks of this strategy is that to succeed with this method, traders must know how certain news releases will affect the financial market and should also be able to predict the market’s response to the announcements.
End-of-day trading strategy
This trading strategy is implemented when the market is going to close. End-of-day traders need to have a good understanding of price action in comparison to the previous day. Based on their observation and previous knowledge they can then predict price movements.
Setting a limit order and taking profit orders are usually followed by the end-of-day traders to avoid risks. Compared to other trading strategies, end-of-day trading calls for less time commitment.
Swing trading strategy
It is a trading strategy that calls for analysis of the market, studying charts, and individual movement. In the Swing trading strategy, traders buy a security when they feel that the market will rise and will sell the asset when they suspect that the market is going to fall.
A successful swing trader will be able to identify the length and duration of each swing. They will also be able to identify the increasing or decreasing level of market demand. Even though you need to research to understand the movement of the market, the swing trading strategy is most suited for people who have limited time.
Day trading strategy
Day trading is suitable for people who are actively involved in trading like a full-time profession. It is based on the fluctuation of price between the market opening and closing time. To avoid the possibility of overnight volatility, they hold many positions during the day but do not leave the position open during the night.
One of the benefits of day trading is that it offers flexibility. A day trader can hold up to 5 positions and close all of them when they want. Also since it does not require any trade to be left open at night, there is minimal chance for overnight risk.
They also offer multiple trade opportunities as a day trader can use both local and international markets and hold many positions. But to be a successful day trader, you must be disciplined and should have a clear predetermined plan.
Trend trading strategy
In Trend trading strategies, traders use technical analysis to understand a trend. They will not be having a fixed view of where the market is going, but they stay alert and then follow the trend.
Trend traders need to understand trends thoroughly, but at the same time, it is important to stay alert and adapt to new changes. They can use various tools to determine equities, currencies, and commodities as understanding trends can be very difficult.
They will have to stay alert and should identify when their system is outdated. The benefit of trend trading is that once they identify the trend, it is quite easy and needs very little time investment. Also, they offer a lot of options to enter and exit a trade.
So, identify the strategy that suits your need and make the most profit out of your trade.