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The Top 5 Proven Strategies in Forex Trading Today

By Anna Peel. Originally published at ValueWalk.

Forex Trading

Forex traders adopt various techniques and strategies to gauge the best points of entry and exit. Such tactics dictate the most suitable timing to sell and purchase currencies. Traders and analysts in the market are continually improving and innovating upon plans to draw up new analytical techniques for grasping the concept of currency market movements. More and more traders are going online with up to 12% of traders constantly using online tools. This article follows a few of the significant types of strategies adopted by forex traders.


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Position Trading

Position trading is a strategy applied in the long-term that can go on for weeks, months, or years. Most times, position traders form their strategy on sustainable macroeconomic trends of various economies. Typically, they function with low leverage levels and trades of smaller sizes with the anticipation of potentially profiting on the significant movement of prices in a prolonged period.

Such traders will most probably depend on technical indicators and fundamental analysis to select their exit and entry levels. This kind of trading could require a great deal of stamina and patience from traders. It may be unfavorable for traders looking to gain a quick profit through a day trading scenario.

Swing Trading

Swing trading can be defined as a speculative strategy. Here, traders seek to leverage trending markets and range bound. Through selecting bottoms and tops, traders can get into short and long positions. These trades are deemed medium-term since positions are held between a couple of hours and a few days.

Traders tend to prefer longer-term trends since they can capitalize on them at several points throughout the trend. On the upside, swing trades offer a considerable number of opportunities to trade. Also, the risk-to-reward ratio is medium.

Transition trading

When it comes to transition trading, the idea is to focus on the lower timeframe and identify an entry of a trade. If the market shifts to your advantage, you can track a stop loss or increase your profit margin on the higher timeline. There are discrepancies in transition trading, but basically, the main concept applies. Transition trading can get you an extreme risk to reward. It can also reduce your risk since your entry trade occurs on the lower timeline.

Day Trading Strategy

Day trading is a forex strategy created to make financial instrument trades on the same day. Before the market closes, all positions of trade are closed. It can one or multiple trades during the day. Trade times for day trading vary as some can last for minutes, hours, or provide the opening and closing of trade throughout the trading day. A day trader only needs to be concerned about capturing the volatility within the day.

It implies that you have to trade your instrument during the most volatile period as that is where the profits are made. You will probably trade breakouts, sell resistance, trade pullbacks, and buy support. As a day trader, you need not worry about the long-term trend or basics of the economy since the information is irrelevant. Day traders are also known to use dividend stock in their stock trading strategy.

Forex Scalping Strategy

Scalping is a trading strategy used within the day that targets to take small gains routinely to create an excellent bottom line. The rigid framework made to safeguard the edge integrity dictates the execution of the trades.

By applying a feasible edge frequently on compressed timelines, systemic risk, and capital exposure is limited. Several crucial factors influence the success of the forex scalping strategy. Some of these factors include low costs, strong trade execution, valid edge, and discipline.

Final Word

Traders have a wide variety of trading strategies that they can use to leverage trading positions and interpret price movements. A few traders may adopt a specific approach virtually exclusively, whereas others may utilize hybrid or various variants of the strategies mentioned earlier.

While none of these strategies is assured of working all the time, traders could find it helpful to get acquainted with several strategies to create an array of tools for adjusting to the evolving market conditions.

The post The Top 5 Proven Strategies in Forex Trading Today appeared first on ValueWalk.

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