Every Forex trader needs to learn how to trade using strategies. These strategies may be different for scalpers, intra-day traders, swing traders and buy and hold traders/investors but all traders need to build strategies.
These strategies will include chart patterns and technical analysis but also how much attention is paid to the economic news/fundamental analysis.
It’s worth mentioning that one of the most over-looked areas of Forex strategies is that of trading psychology and making sure that as a trader you are mentally ‘in the zone’ to trade at your best.
So what kind of strategies do you need to build into your arsenal of weapons?
Well to start it’s good to be able to identify chart patterns including all types of breakouts as these are the most common ways traders make good consistent profits.
Some say that the indicators/oscillators are the holy grail of trading but it’s price action which is going to pay at the end of the day. Price is all important as this is essentially what your broker will quote and how you make your profit. Keeping a good eye on price by watching levels of previous supply and demand will make sure you are maximising on your open positions.
By using indicators for example the Relative Strength Index (RSI), Commodity Channel Index (CCI), Stochastic reading etc you can confirm market sentiment and direction but price should always be the driving force for your technical strategies.
Breakouts of a range/channel/triangle/support and resistance levels are strong trading opportunities and common Forex strategies. This is due to historical levels and almost a self-fulfilling action – they exist and traders use them. In turn, because traders use them, they will provide good entry/exit levels and points of stalling in a volatile market.
Successful Forex strategies rely on good volatility and clear market movement. Once price has stalled, inertia within the market grinds to a halt. Price will move sideways until inertia regains momentum – this is when triangle and channel breakouts together with breaks of support and resistance levels give such good rewards to the patient trader.
Again it is a focussed mindset which allows the trader to be able to wait for these opportunities as part of consistently successful Forex strategies.
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