No matter which profession you are in or which type of business you are trying to establish, you just need to have a good strategy for making a career out of it. In Forex trading different forex trader uses a different type of strategy when they look for potential forex signals. In this article, we are going to talk about different trading strategy and their pros and cons so you may stay alert if you are using that strategy.
Forex trading strategy
Forex trading strategy usually defines what method an ETF trader uses to identify potential buy or sell opportunity and also were to close his positions. Some of them use fundamental analysis and some prefer technical analysis and some use both to identify potential signals. A good Forex trading strategy offers you to be confident when you are opening a position with proper risk management.
Price action trading
In price action trading strategy traders usually uses historical price movements along with few indicators. In this strategy opening position mostly depends on the indicators with some fundamental analysis. It can be used to finding trade in every possible time frame and because of this, this strategy is used by many traders. In this strategy, traders use Fibonacci retracement, candlestick pattern, trend line, indicators, and oscillators to identifying entry and exit points. ETF trading is easy but you must have the best broker. Visit https://www.home.saxo/en-sg/products/etf to know more about this industry.
Range trading strategy
When the market is less volatile and there is no active trend going of then this strategy is much more effective than others. In this strategy, traders find out potential support and resistance level and open positions according to them. Technical analysis is the act as the main tool in this strategy. In this case, there is no fixed length of the trade it may take a short or long time to hit your take profit level. But you have to be concern about the risk and have to use proper risk-reward ratio so that if the market goes against you then your account might not be hurt a lot. Traders usually use oscillators like Relative strength index (RSI), stochastics as timing tools to find out potential entry and exit points. You can find a substantial amount of trading opportunity but it requires lots of time and you must have a clear knowledge of technical analysis.
Trend trading strategy
In Forex trading there is a word that goes like Trend is your friend when you are trading in the Forex market. Traders from all experience levels use this strategy to earn a profit. If you like to trade with the trend line then you must look into a higher time frame to identify the running trend because the market fluctuates a lot in a shorter time frame so finding the trend is hard there. You can also add a price action trading strategy with this strategy. For finding good entry and exit points traders who follow this strategy usually use oscillators like RSI, CCI, etc based on a positive risk-reward ratio. For example, if you put your take profit level 50 pips away then you must put stop loss level 50 pips or more away from entry points. You can use your favorable Risk reward ratio but it takes long periods of investment.
This trading in mostly dependent on fundamental analysis but sometimes Eliot Wave Theory is applied with that. A small fluctuation in market movement is not considered in this strategy because it does not affect the market in a broader picture. You can apply this strategy in any type of trading market. This strategy is suitable for trading in a long period like weeks, months, and some case years so you have to have a clear understanding of the economic factors that can affect your position. Trades that are going to be open for months for them finding entry and exit points are very hard to find. So you need to use technical analysis to determine potential entry and exit points. It requires minimal time investment but you can find very few opportunities.
We have covered 4 Forex trading strategies with their pros and cons so that you may understand them properly.