Successful trading requires a certain level of knowledge. To increase your chance to profit, it’s important to know as much about the markets and the trading strategies behind them as possible.
Strategies provide you with a roadmap for your forex trades, reducing panicked decision-making that can occur in the heat of the moment. By learning forex strategies you will learn how to maintain strong discipline, which is key to good forex trading. They will guide you through your trades and give you the best chance for a possible successful outcome.
It’s never a good idea to make your forex trading decisions based on a gut feeling. The most successful traders are those who devote a lot of time to learning about the markets and developing a strong sense of risk management through proper use of trading strategies. Learning about the markets helps you begin to see patterns, trends and conditions in the market and, eventually, the strategies themselves will allow you to predict the most probable outcomes.
All trading is risky, which is why learning about forex strategies helps you manage that risk. This all comes with experience, but one of the best ways of learning how to use them is by practising on a demo account, which allows you to test your strategies in a live environment that carries zero risks since you’re not investing a single dime of your own money.
Demo trading builds your confidence to start real-world trading, so it’s a good idea to take your time and practice as much as possible first.
Before getting into the strategies, let’s have a quick look at some of the most popular trading styles out there, since you can’t have one without the other.
beginners love this strategy because it’s simple to understand and has been tried and tested for years. It simply means exiting the trade before the close of play. Day trading removes the risk of being affected by possible large movements overnight.
this refers to short-lived trades, sometimes held for just a few minutes. Scalping is all about hoping to beat the bid/offer spread quickly, and possibly skim a few points before the trade closes.
this is the strategy of the experienced trader and takes a lot of patience and discipline. Be careful with this one if you’re brand new to trading. It looks at long term trends and aims to get the maximum profit from massive shifts in prices.
swing traders are looking to profit from short-term price patterns, and will look at bars every 30 minutes or so.
Once you’ve figured out which style suits you best, it’s time to start exploring strategies. Here are some of the most popular ones.
this is when traders use the price action in currencies to work out the best purchase price, and is a strategy popular among newcomers as well as seasoned traders.
this follows along the lines of the Fibonacci sequence (i.e. 1, 3, 5, 8, 13 etc.) Traders use the sequence over their price charts to predict possible future market rates.
many traders use this strategy when currencies are moving in a typical trend, it’s simply the measure of standard deviation or volatility of a stock price. The Bolly Band forms a limit around short term price movement.
This is a step up from the Daily Fibonacci Pivot Trade and requires the trade to map Fibonacci sequences over the same trend but at different points. If the points match up, it indicates a strong area of support.
Popular with gold trading, this is trading which looks at values that drop from their opening price, and then shoots back up to on or near its starting price. Traders who use this will have a good idea of the lines of resistance and support.
fractals are patterns recognised by traders as confirming a reversal. In a bullish turn, a fractal looks like a dip in the middle, sided by higher points. In a bearish turn, a peak forms with lower points on either side.
this is when stochastic fluctuations signal a trend that is likely to reverse, which is a sign to traders that they should change their position on an asset.
the opposite of Pop ‘n’ Stop, where an asset falls, wavers and moves in a clear direction. Get the timing right, and you may benefit.
a Pop ‘n’ Stop is where traders take advantage of a quick, and often short-lived, breakout from a tight range, that could otherwise be missed. Traders will pick up on price action theories and rejection bar candle patterns to recognise this opportunity.
Test out strategies on a demo account.
We’ve mentioned the demo account before but it’s worth repeating. You can practise and learn all the tricks of the trade on a demo account by experimenting with any of the strategies above. Practising your strategies without the risk of losing any real money is a huge advantage for newbie traders.
Successful trading requires knowledge and confidence – both of which can be honed on your demo account in your own time.
Alpari International’s demo account provides you with the tools to trade in genuine market conditions. This is the place where you can make as many mistakes as you want without any ramifications to your capital, and prepare mentally – i.e. learn how to control your emotions and develop patience – and build up the confidence to start investing your own money.