Welcome to the dynamic world of Forex trading! People get excited by the market because they see a great opportunity to profit, but what is the secret to success? The secret of success is not luck or guessing – it is having a plan.
A good plan is called a trading strategy. In this guide, we will give you a number of simple and popular forex trading strategies and explain them in plain language. We want to help you discover a style that you feel comfortable with and ultimately, begin your journey with confidence.
What is a Trading Strategy?
We will begin with a really simple definition. A trading strategy is simply a set of rules you create for yourself.
These rules help you determine:
- When should you buy a currency.
- When should you sell a currency.
- When should you stay out of the market for the day.
It is just like a recipe for a cake. When you make the cake, if you follow the recipe, your chances of making a delicious cake are going to be greatly increased. If you just guess, you might not be so successful. Every successful trader uses trading strategies for effective forex trading.
Strategy #1: Scalping (For Fast Action)
Scalping is one of the most well-known forex trading scalping strategies. It is a very active form of trading.
The aim: To make lots of very small trades during the day. A scalper might hold a trade for seconds or minutes, but only to make a couple pips.
Who it’s for: This trading style is a great fit for people who love fast-paced action, can make very quick decisions, and can focus heavily for short periods of time.
What you need: To be successful at scalping, you need a broker that has two things, very low cost (spreads) and super-fast trade execution.
Strategy #2: Day Trading (A Balanced Approach) balanced
Day trading is yet a very popular option, although, it will be a bit slower than scalping, but still very active.
Objective: Open and close a few trades in the same day. A day trader never keeps a position open overnight. Generally, a day trader will end the day with no open positions.
Who it’s for: This style is recommended for traders that want to be active in the market, but not at the ultra-fast pace of scalping.
What you need: Day traders have to have a decent understanding of what is going on in the news that day. Day traders also have to have a very reliable trading platform. Day trading is one of the most common forex trading strategies.
Strategy #3: Swing Trading (For Patient Traders)
Swing trading is an intermediate-term trading style. It is perfect for people who cannot devote all day to watching the markets.
The Objective: Try to catch larger swings in the market. A swing trader may hold a position for a few days or possibly weeks, and is trying to capture a larger portion of a market trend.
Who it’s for: This is the best forex trading style for people who have a hectic lifestyle and don’t mind waiting. You will only need to enter your trades once or possibly twice a day.
What you need: Swing traders will need a good understanding of the overall trend.
The Right Broker for Your Strategy
No matter what strategy you’ve chosen, it will only work with a truly great broker backing it. A good partner is essential for the best forex trading strategy.
- For beginner traders who simply want to learn forex trading strategies, the platform has to be straightforward. A broker like Capitalix or SmartSTP would be a great choice since it is so user-friendly.
- For forex trading scalping strategies that focus on rapid execution, you require a broker who has advanced and reliable technology. This is where brokers with platforms like that of FX Road and Trade EU Global are the most beneficial.
- Swing and day traders will want advanced tools for their analysis and would love the platforms of brokers like CapPlace. For the absolute lowest costs, which is key for scalpers, an ECN broker like FirstECN is the best choice.
- Traders strategies forex world will continue to change and be improved upon. More innovative brokers such as SuxxessFx, Tradgrip, and Algobi are known to create new tools and features that will help almost any trader.
Conclusion
You may be wondering what the single best forex trading strategy is. The answer is, it’s different for everyone. The best is the one that matches your personality, time constraints, and goals.
- If you’re an action or speed person, then scalping might be for you.
- If you like a more balanced approach, then day trading might work better for you.
- If you’re more patient and more busy, then swing trading might be the way to go.
The most important thing to do is open a free demo account. You can place trades without the risk of losing real money while trying each of these different forex trading strategies! Just notice which strategy feels the most comfortable to you. Once you find a style that you enjoy, you will be on your way to success.
FAQs
- What is a forex trading strategy?
It is a set of personal rules that a trader uses to decide when to buy, sell, or stay out of the market. It helps to remove emotion from trading.
- Which strategy is best for beginners?
Many beginners start with swing trading or day trading. These styles are a bit slower than scalping, which gives you more time to think and make decisions.
- What are forex trading scalping strategies?
These are strategies that involve making a very large number of trades for small, quick profits. This style requires a broker with very low costs and fast execution.
- Can I be successful without a strategy?
It is very difficult. Trading without a strategy is like gambling. The most successful traders always use well-defined forex trading strategies.
- How do I find the best forex trading strategy for me?
The best way is to open a free demo account and practice. Try different styles. Keep a journal of your trades. You will quickly learn what works best for your personality.