Once you know the essence of today's Forex trading, the next step is to build one or more trading strategies. For novice traders, the ideal scenario is to follow a simple and effective strategy that will allow them to confirm what works and what doesn't, without too many variables to confuse things.
Fortunately, banks, corporations, investors and speculators have been trading in the markets for decades, which means that there is already a wide range of trading strategies. Here are the main types.
Scalping is a trading strategy that involves buying and selling currency pairs in very short periods, usually between a few seconds and a few hours. This is a very practical strategy that involves making a large number of small profits as these profits accumulate.
Traders who follow scalping trading strategies usually:
* They open many deals for short periods
* They collect profits in the range of between 5 and 10 pips
* They open deals with large volumes
* They use high levels of leverage.
The financial lever increases not only the size of potential positions, but also the potential gains and losses. Therefore, the use of significant amount of leverage should be done with extreme caution
Day trading strategies
Under daytrading strategies means trade within a day. This is a slightly more conservative approach than scalping and trading is focused on daily price trends . In most cases, trades are open within a few hours, but in some cases they can be delayed for several days. For successful day-to-day trading strategies, it is good for the trader to have a highly liquid financial instrument such as currency or stock. For example, major currency pairs seem to be a good choice for implementing trading strategies.
Swing trading strategy
Most swing trading is a medium-term trading approach that focuses on larger price movements than scalping or day trading strategies. The swing approach is based somewhere between short-term trading and investment.
Traders can enter a trade and stay in it for a few days or a few weeks, instead of having to constantly sit in front of their trading platform.
This makes swing trading a good option for people who trade along with their daily work. These were the basic strategies for types of trading strategies. Of course, there are other approaches, such as even longer-term investment strategies , in which the deal can remain open for months or even more than a year.
Each trader must choose the right method of trading for him, according to the time he can spend on trading, capital and personal temperament. One strategy may work great for one trader or investor, while another may not. This is due to differences in the character of traders and investors and different risk tolerances.
In addition, one trading strategy may work well on one financial instrument but fail on another. As we have seen, the time frame is also important.