What are the best Forex trading strategies? – a daily film
South Africa has the most active Forex community on the continent. The daily volume is $ 20.3 billion! Popular Forex FXTM Trading Strategies help millions of people earn money, but which one is better? Use our tips to find the style that best suits your needs.
Choose appropriate deadlines
Not all traders are enthusiastic about the hectic action. You can open and close all positions quickly, or leave them open overnight. Whatever your perspective, deadlines are a deciding factor.
The most popular software adapts to all styles. For example, MetaTrader 4 has nine time frames, from 1 minute to 1 month. You can look at market movements from any scale. For example, scalpers are interested in the shortest changes. They often use 15 minute or even 1 minute charts to spot good entry opportunities.
Meanwhile, swing traders don’t worry about tiny fluctuations. Most often they look at weekly dynamics, paying attention to daily changes and 4-hour shifts. To conclude, start by identifying the optimal rate of action. How long are you going to stay in a trade?
Choose the trading frequency
How many positions will you be opening daily? the Forextime broker provides free educational resources, so you can make an informed decision. For example, if you behave well under pressure, consider scalping. You will execute multiple trades, entering and exiting the market throughout the session.
Traders looking for fundamentals take a long-term view. They focus on macroeconomics – events covered by the media. As a result, their trades are less frequent and price charts are not the primary analytical tools.
Calibrate position size
How many currencies will you be trading at a time? The greater the volume, the greater the risk. So look for the optimal balance. Most experts will advise you to risk 1% of the overall capital per trade. Therefore, if there is $ 50,000 in your account, it is reasonable to limit the position size to $ 500.
Risk tolerance should not be a variable. Do not exceed the authorized threshold. You can only lower it – for example, to 0.5%. In general, the volumes are high when the frequency is low, and vice versa. Scalpers make a little profit on several trades. For them, quantity beats volume. Now, let’s take a look at this strategy in detail.
How does scalping work
In scalping, trades are short lived. A position is active for less than an hour – sometimes a few minutes. On a good day, modest profits accumulate, bringing a decent total. Strategy is very stressful as you have to make quick decisions and watch the charts closely.
Scalpers are drawn to liquidity and volatility. They choose the markets where it is easiest to find a match. Prices are relatively variable, so you can capitalize on short-term fluctuations. The average profit target for each position is 5 pips.
How day trading works
As you can guess, the positions are opened and closed on the same day. They never stay open overnight. Day traders avoid overnight fees, but their style is still quite intense. This method is feasible on all financial markets, including equities and derivatives.
Finalizing positions before the market closes limits your risk. Also, you can overlook the smallest changes. Usually, day traders choose 30-minute or 1-hour frames. They work during the day, keeping an eye on the markets.
The risk is also perceived differently. The general limit of 1% holds, but you can also risk no more than 3% of the principal per session. Unlike scalpers, day traders are more likely to use fundamentals. Instead of looking for hammers or morning stars, they focus on financial news. The evolution of oil prices, GDP, geopolitics, interest rates, etc. helps them predict trends.
How position trading works
Position traders need the longest time frames. They also focus on fundamentals and cyclical trends, ignoring rapid changes. This style is most suitable for huge volumes, as you can limit your action to several trades during the year.
You can open a position and wait months for it to play. Obviously, this method requires a lot of self-control. However, the profit targets are spectacular – often several hundred pips per trade.
Do I have to follow only one strategy?
In Forex, learning is a lifelong process. No strategy is guaranteed to bring returns. Pick a style that suits your own risk tolerance, goals, and resources. What works for someone else may not work for you. Try popular strategies in demo mode and develop the necessary habits. Keep a Forex trading log with the parameters of each movement. If a style is too stressful or doesn’t bring satisfying results, try something else.