Forex Strategies – Going Further

Forex Strategies – Going Further

Forex strategies. Every trader needs them. The more experienced you are in trading the more diverse

your strategy portfolio will be. Either way, you need at least one forex strategy. The type of strategies

you use will depend largely on your personality. You need to find what works for you. Below are

some more advanced forex strategies, however, the bold and daring beginner traders might want to

explore them on their demo accounts:

Swing trading

Swing trading typically lasts between a couple of days to a week. Sometimes these trading positions

can stay open for a couple weeks although this is not the average. Swing trading is beautifully

balanced between the short trading and long trading strategies of forex.

Because of the time lengths, swing trading is a great strategy for those people who are interested in

forex as a side income or hobby. These people may not have the time to sit throughout the day

studying analysis charts or picking up market trends. Their work, studies, and other priorities are

dominant over forex trading. Swing trading is ideal for these traders.

Swing trading requires a couple of hours studying analysis charts to pick up medium trends in the

market. The key to swing trading is holding firmly to your analysis. Can you persevere through the

dips of the market as you wait for your profit to kick in?

Swing trading focuses on buying currency pairs in the extremes. Ideally, you are looking for those that

have been overbought or oversold. As the market returns to a more balanced state, you cash in your

profits.

When you are swing trading, you’ll be on the lookout for those high volatility and tight spreads.

You’ll be trading anywhere between 50-200 pips per trade.

A deeper look at scalping

Scalping is another form of day trading. It capitalizes on the slightest fluctuations in the forex market.

The difference between scalping and other day trading strategies is found in the amount of time it

takes to enter and exit a trade. When a forex trader implements scalping, they will complete a single

trade within a maximum of five minutes.

Where most forex strategies allow traders to trade a smaller amount of money, scalping requires large

trades to compensate for the small pip fluctuations. In scalping a trade may either lose or profit a

couple of pips; the profits are marginable. The larger the investment the more profitable the positive

pips become.

A scalper will look to make around 200 trades in a day. This is not an exact amount of trades per day,

but my point is that in order to make profits, scalpers need to trade a lot during the course of the day.

This requires intense focus, quick decision making, and dedication. A scalper needs to be able to

devote a large amount of time to trading. If you do not have sufficient time available, scalping may not

be the best strategy for you.

For scalping to be worthwhile, a scalper’s best friend is the stop-loss order. The stop-loss order

helps to keep losses to a bare minimum. To be effective, the stop-loss order should be placed close to

the amount that the currency pair was purchased. For example, you purchase USD/EUR at 1.2543

your stop loss order might be placed at 1.2544 instead of 1.2548. Thus, you will lose one pip in the

event of a loss instead of five pips.

Risk management is key to successful scalp trading.

Positional trading

Most forex trading strategies are day trading strategies; meaning, they do not look at the trends of the

market over a lengthy period of time. Where scalping focuses on micro trading and short time frames,

positional trading is focused on a lengthy period of time ranging into months.

Positional trading cannot be implemented without a thorough long-term analysis. As a positional

trader, you need to be aware of the market trends, history, and other analysis.

Positional trading is the direct opposite to scalping. Positional trading requires a smaller investment

than scalping. Usually, traders will not trade more than 2% of their account in a positional trade.

Because you are going to hold the trade for a long time, you will gain a higher pip profit. Traders

usually aim to make a minimum of a couple hundred pips in a positional trade. The larger the pips the

more profit you make.

Rollovers come into play with positional trading due to the time frame of this style of trading. This is

where a loss can easily be incurred. All is not lost. Depending on what your currency pair does, the

rollover could either be positive or negative. In the event of a positive rollover, your profit will be

rewarding.

Irrespective of loss or profit, you should incorporate rollover into your strategy. Try to cover the cost

of the potential rollover in your strategy so that you break even after incurring a loss and negative

rollover. This will require a bit of speculation however, it will help manage your risk.

Positional trading hopes to make a profit at the end of a trade or at the very least to have broken even.

Ideally, you are wanting your trade to ride out the losses into the profits in order to minimize your risk

and losses.

Price action trading

Price action trading is a great strategy for those traders who want a tailor-made strategy and full

control. Unlike other strategies that follow specific rules, price action trading is open to each trader’s

interpretation of the data provided by price action analysis.

How does it work?

If you want the whole truth and nothing but the truth, then price trading is the answer. Because price

action trading tells you what has happened it is void of any futuristic predictions. Price action trading

is honest. It focuses on marrying technical analysis tools with recent price history in order to identify

trends in the forex market.

Price action trading is more adept for short or medium trading than for long-term trading. Although a

large amount of trading strategies including price action trading strategies float around the internet,

the appeal of price action trading lies in the flexibility to create your own portfolio of strategies.

From this portfolio you’ll be able to pick out the best strategy for the current trends you will be

trading on. This will aid you in improving your profitability while reducing your risk and maintaining

a good emotional outlook.

Hedging trading

Hedging is the equivalent of insurance in the world of forex. When a trader implements a hedging

strategy they are looking to reduce risk while securing profits. To do this a trader will make use of

their analysis whether fundamental, technical or both. The analysis will show the trader where the

risk in the market lies, which currency pairs to trade and which currency pair to trade long and short.

In hedging, you are looking for a strong correlation between pairs.

For example, you may decide that the best currency pairs to trade are the USD/EUR and the

GBP/USD. You look at your analysis and decide to go short on USD/EUR and long on GBP/USD.

You’ve decided that based on your analysis that if the GBP/USD turns over a profit but the USD/EUR

renders a loss the difference between the two will still result in an overall profit. At least this is your

logical hypothesis. You implement your trading strategy within your hedge. The market moves

according to your prediction. The EUR drops and the GBP soars. You walk away with some profit.

In the above example, your hedging worked fantastically.

News trading

News trading borders on the lines of gambling since it is highly volatile and erratic. Some traders

love the thrill of watching the market intensely during a significant news release. Intense risk

management and zero emotions are needed for traders to be successful in news trading. Traders who

implement this strategy have balls of steel so to speak.

The challenge with news trading is that no one can predict how the market will react to the news or

event. It becomes a let’s wait and see situation. Only the most daring or most experienced should use

this strategy. That being said, if you want to experiment with it please do so on a demo account.