The Forex market is made up of different trading methods or techniques, all with their own strengths and weaknesses. There are many aspects that need to be taken into consideration when evaluating what trading strategy to adopt. But all your strategies will fail if you don’t trade with the best Forex broker. Hence, it becomes evident to choose from the top rated Forex brokers, which you can find through numerous top Forex brokers review that are available online.
Although the market is unpredictable at times, it does follow certain patterns over time that allow traders to have some degree of success using their chosen strategy. To apply a certain strategy, it is necessary to apply them through the top rated Forex brokers, which you can choose from Forex broker ranking using top Forex brokers review from different sources. Even though you trade with the best broker, it can be difficult to identify which strategies are best suited for you, but following a few simple guides will help lead the way.
It is therefore vital that before starting out in Forex trading, you have a proper understanding of what methods or techniques are best suited for you. The most popular trading methods are explained below:
The trend of a currency pair simply refers to whether it is currently moving up or down over time. A trader who uses this method will enter the market when they see confirmation that the price action has reversed from its current position, indicating a possible new trend beginning.
This is where the trader has an open trade at all times or for a long time with no stop loss or profit target. Further, it involves opening positions upon the trend following. Range trading can be very profitable, but since there are no set targets to exit a position on, this method requires patience.
Similar to trend trading, range traders enter on confirmation that the currency pair has reversed after moving through key levels of support and resistance. Nevertheless, range traders usually follow two techniques; some traders open new positions on the breakout from a range while others wait for retracements back into the range before buying/selling.
This strategy relies on the use of economic data announcements to identify intraday opportunities in the market. Moreover, it is a popular method for those working outside traditional hours as these news events are seen by all market participants, whether they are based in New York, Tokyo, or anywhere else across the globe.
Trading based on news releases can be very profitable. But it comes with risks, as many traders are unable to exit positions on time due to the fast-moving nature of markets once an announcement has been made. Swing traders try to take advantage of short-term price swings that are seen after big releases by opening positions for between one and five days or even a few weeks.
Scalping is one of the most common strategies used by traders who are looking to make quick gains by opening and closing trades within short time frames of between one minute and an hour. This requires a lot of practice as many of these traders are using automated trading systems, which may require programming skills. If you want to try this method on your own, it is still essential that you have both a running chart and order history open at all times, ready to pounce once price action gives confirmation that the market will move in your favor.
This is not something that can be taught overnight, but day traders rely on intraday price swings in order to make profits without holding positions overnight or for extended periods of time.
Grid trading strategy involves opening orders at specific support and resistance levels on your chosen time frame for a particular currency pair. It is similar to breakout trading strategy from range trading, but the difference is that grid trading doesn’t require knowing the direction of the trend. Rather than exiting all positions at once, grid techniques allow traders to leave them open to take advantage of further movements in the market.
It is an advanced and effective way to trade large swings using Fibonacci retracement levels. Further, this method looks for buy and sell opportunities on both the flat correction phase as well as the impulse wave. As with many trading strategies, there are a number of variations that can be used depending on your chosen time frame – primarily using either 38.2%, 50%, or 61.8% retracement levels. These traders look to place orders just above/below these levels according to whether they are looking to buy or sell at each stage of the trend.
Knowing what types of techniques work for you is essential before trying them out in the marketplace. So, choose your strategy carefully and stick with it until you find yourself making consistent profits over time with minimal risk.
As we have said earlier, choosing the right broker through top Forex brokers review will help you to apply the methods properly. Hence, you should not forget about picking a broker without checking Forex broker ranking.