Do you know that the Forex trading market had reached $6.6 trillion per day in 2019 alone?
Needless to say, the trading volume has done nothing but increase from that point onward. But, to be a proper Forex trader, and conduct more right trades than wrong ones, you’ll need a couple of forex trading strategies in your toolkit.
If this is your first foray into the world of forex trading, and you’re already feeling overwhelmed, no worries. We’ve got you covered. Keep on reading to learn all about what a forex trading strategy entails, as well as three of the most common strategies in play.
What Is a Forex Trading Strategy?
Before delving into the different forex trading strategies you’ll want to use, let’s make sure you have a solid understanding of what a forex trading strategy is all about.
In the simplest of terms, a forex trading strategy is a system a trader would use to determine when to sell or buy a specific currency pair.
A well-established strategy will give the trader the space to analyze the market. Then, execute trades with confidence, always remaining within the predetermined risk management ratios.
Keep in mind that you’ll need a reputable forex broker to conduct these trades, so make sure you learn more here before you open a trading account.
The Queen of Forex Trading Strategies: Trend Trading
We can’t talk about forex trading strategies without starting with one of the oldest strategies in the playbook, and that’s trend trading.
It’s a simple and reliable strategy. By following the direction of the current price trends, traders can make solid decisions regarding their trades.
Experienced traders will always identify three elements of the trend before making any decisions. Those are the duration, the strength, and the direction of the trend.
Long-Term Strategy: Position Trading
Forex trading is more known for its short-term trades. However, you can use strategies like position trading to hold your position for a big chunk of time. This can be anywhere from less than a month to over one year.
For this strategy to prove successful, trades will need to have a solid macro view of the whole market. Also, you’ll need the ability to sustain smaller market fluctuations, especially ones that counter your position.
In the Hands of Global Economic Events: News Trading
There’s no denying the influence of global economic events on the forex market. That’s why traders can use the news trading strategy to anticipate any short-term breakouts or market movements.
Those can be decisions on interest rates, consumer and business surveys, or overarching economic reports that tackle macroeconomic factors. Like GDP, national trade balances, and inflation.
Applying Simple Forex Trading Strategies
It can be nerve-wracking for any new forex trader to enter the market for the very first time. However, as long as you take your time, assess your risk and avoid over-trading, you’ll be good to go.
Hopefully, our little guide on the key forex trading strategies has shed some light on the whole process and made it look a little less intimidating.
If you liked our explainer, make sure to check out additional tips and strategies in our finance section.