The FX market is one of the biggest money-makers on Earth. It’s estimated to be worth around four trillion dollars a day! But copy trading signals in the Forex market can be intimidating for newcomers, especially considering how quickly changes in value happen and how important every decision is. There is therefore a need for an effective trading strategy.
A forex trader’s choice or method of buying or selling a currency pair is referred to as a trading strategy. It enables traders to analyze markets and securely place transactions using effective risk-management strategies.
Various tactics can be used, but it is vital to understand and feel at ease with the strategy. When choosing the best strategy, it is significant to consider the particular objectives and resources each trader has.
Factors To Consider When Choosing A Trading Strategy
Before discussing some of the Forex trading strategies you are unfamiliar with, you must understand the factors to consider when choosing a trading strategy. Three main factors should be put into consideration; they include;
1. Time frame
It’s crucial to select a time frame that suits your trading approach. Trading on a 15-min chart or a weekly chart significantly impacts a trader. You should concentrate on the lower time frames, such as 1-min to 15-minute charts if you intend to lean toward becoming a scalper: a trader who seeks to profit from smaller market moves.
On the other hand, swing traders are more likely to generate profitable trading chances using a daily chart and a 4-hour chart. Therefore, determine your desired trading approach before deciding how long you want to stay in a trade.
Different trading strategies correspond to different periods (long, medium, and short-term).
2. Position size
It is crucial to choose the ideal trade size. Knowing your risk sentiment is a must for effective trading strategies. Taking on more risk than you can handle can result in significant losses.
Setting a risk limit for each trade is a common piece of advice in this regard. To avoid risking more than 1% of their account on a single trade, traders frequently place a 1% restriction on their trades.
3. Number of trading opportunities
When selecting your strategy, you should consider how frequently you want to open positions. You should concentrate on a scalping trading strategy if you want to open multiple positions.
On the other hand, traders who prioritize studying fundamental data and macroeconomic statistics are more likely to spend less time in front of charts. As a result, they choose trading with larger positions and higher time frames.
Some Unfamiliar Forex Trading Strategies
Daily Fibonacci pivot trading strategy
A confluence or ‘coming together of the pivot support line and the Fibonacci retracement lines (32%, 50%, or 62% lines) is sought with this strategy. For example, you can wait for a confluence if you want to enter a long position during an uptrend. Waiting for a bullish confirmation candlestick will ensure a stronger signal. Fibonacci gives the best indication, and the pivot point supports it.
The Bolly Band Bounce Trade.
The upper, middle and lower Bollinger Bands are considered when using the Bollinger Band Bounce method. You rely on the underlying asset to remain inside the support (lower band) and resistance ranges (upper band).
With the expectation that they will rise toward the middle, the idea is to buy when prices are trending close to the lower band. When prices reach the upper band with the expectation that they will decline, selling is recommended. If the prices decide to “walk the band” rather than bounce to the middle, the transaction may end in a loss.
The Forex Overlapping Fibonacci Trade
This method can be used during either a bullish or bearish market movement. Let’s assume that the market is rising. In this situation, the plan is to map two Fibonacci retracement lines. The first step is to recognize three waves: an upward trend (first wave), a retracement (second wave), and then the emergence of an upward trend (third wave).
You draw one Fibonacci from the uptrend’s low to the trend’s peak. The second Fibonacci is then drawn from the low point of the second wave to the highest point. The next stage is to identify confluences or overlaps between the lines of the two distinct Fibonaccis. The degree of convergence shows a strong line of support during an uptrend. The convergence verifies the existence of a strong line of resistance in decline.
Forex trading strategies can be difficult for new traders because of the market’s illiquidity. The Forex market isn’t as active and predictable as stock trading, meaning traders must find a strategy that works for them. It can be daunting to try to find what works best for you!
However, once you have found a method that works well for you, it can be incredibly profitable and becomes second nature.