Are you tired of making peanuts with tiresome forex trading strategies? Do you want to take your trading game to the next level? Then, this article is for you.
Every successful forex trader in the market utilizes specific trading strategies to make their portfolio better. These strategies help you face market challenges and make more profits. As we all are acquainted, the forex market is risky; that’s why you must learn and adopt trading strategies to cope with potential losses.
In this article, we’ll get you through the ten best forex trading strategies to maximize your profits. Without further ado, let’s get started.
Popular Types of Forex Trading Strategies
Scalping Trading Strategies
Scalping trading is some of the popular and advanced forex strategies. Traders who want to skim a profit of just a few pips utilize these strategies. The entry and exit point in scalping is pretty fast compared to other strategies. Traders execute multiple trades with the scalping trading strategy to make more profit in the market. Most of the time, scalping trading strategies are used when the currency market volatility is high.
In addition, short time frames chart are used in this strategy, such as 1-minute, 5-minute, and 15-minute charts. So, if you are a quick decision-maker, this strategy is for you.
Trend Following Strategies
Trend-following strategies are considered to be one of the favorite strategies for professional traders. You can understand it with a simple line “riding the trend.” It means if the market is going in a specific direction, such as bearish or bully, you go with it.
Furthermore, the traders aim to make a profit from the market trend. The basic principle of trend following is to buy when the market is in an uptrend (rising prices) and sell (or go short) when the market is in a downtrend (falling prices).
The traders also leverage different technical indicators and strategies to identify trends in the forex market. This strategy involves a trailing stop loss limit, which helps protect trader profits.
Position Trading Strategies
If you are looking to make profits in the long run, then this strategy is vital for you. In this strategy, the traders identify long-term trends and aim to hold positions for weeks, months, or even a year, unlike scalping or day trading.
Moreover, the traders set wide stop losses and take-profits during position trading. It helps their trade get more breathing room and capture substantial price movements over time. You can utilize moving averages and relative indexes to identify long-term trends. As this is long-term trading, it is important for you to focus on one currency pair to avoid major losses.
Swing Trading Strategies
Swing Trading is an old-school strategy that is utilized by the traders of every market, such as forex or stocks. In this strategy, the traders aim to capture the price movements of a stock or currency pair while holding a position for days or weeks. It is pretty different from position trading.
Furthermore, swing traders perform different types of technical analysis to identify short to medium gains in the market. These traders don’t have any concerns with the long-term price movement of the assets. They are only concerned with the profit from the market movement.
As with any trading approach, swing trading in forex involves both potential rewards and risks, so it’s essential for traders to have a well-thought-out trading plan and to stay disciplined in their execution.
Day Trading Strategy
Day trading is a popular and common strategy all professional and beginner traders utilize. This trading refers to the purchasing and selling of the forex currencies on the same trading day. The traders aim to make profits through small market movements. It is not like position or swing trading, in which traders hold their trades for weeks or months. Moreover, the trades in the day trading strategy may only last a few hours or minutes.
Range Trading Strategies
A range develops when a currency pair or asset costs between a high and lower extreme in the given period. In range trading, the primary goal of a trader is to buy the currency pair at the bottom of the range (support level) and sell it top of the range (resistance level).
It is important for traders to identify the market conditions and volatility before utilizing range trading strategies. As we all are acquainted, the forex market is highly volatile and can be uncertain at any moment, so range trading strategies may not work out at that time.
Best 6 Forex Trading Strategies
50-Pips a Day Strategy
50-pips a day is a simple and easy strategy to learn for beginners and make profits in the forex market. In this strategy, the traders set a profit target of 50 pips a day, and once the trade reaches this point, the trader closes the trade to secure the profit.
We advise you to stick with a 15-minute timeframe after identifying the highs and lows of the market in which you want to trade or just stick with a one-time frame in this strategy. Traders also use volume indicators if the market is having impulsive movements (higher highs or lower lows). You can use other technical indicators in this strategy to maximize profits.
Resistance and Support Strategy
Resistance and support levels are the wheels of a trading strategy where you can easily assess the levels in price charts. How? Let me explain: Resistance levels are where price levels stay stagnant and don’t rise. On the flip side, Support levels are measures of the inability of the price to slope down.
This strategy assists traders in making decisions revolving around these levels, selling near resistance levels and buying in otherwise. Additionally, these levels indicate the likelihood of price reversing or bouncing at crucial price areas.
Carry Trade Strategy
If you’re an experienced trader, you must be familiar with the huge difference in interest rates between two currencies at most times. But what if you can use it as a means of profit for yourself? Yes, it is possible!
Carry trade strategy involves burrowing a currency with a low-interest rate and then investing it in a currency with a whooping interest rate. Thereby, you can squeeze out a good amount of profit from that interest rate difference with stable market expectations.
Counter Trend Trading Strategy
Market trends can be an arduous hurdle for many traders to stand out. In this case, the Counter Trend strategy is the right nail! Here traders stand opposite to market trends when it is exhausted or pointing towards a market reversal.
With this strategy, you can easily enter positions sought after for risky rewards and earn a profit when a trend faces a pullback. But it would be best to steel your nerves enough to follow this trend as the market trend can get stronger again and pour cold water on all your efforts.
Bollinger Bounce Strategy
Being a trader, you must have used Bollinger bands as the most efficient volatile indicator of moving averages. Fortunately, you can use this indicator as a trading strategy too!
All you need to do is focus on price activities around lower and upper bands, through which you can predict the potential bounces. Sounds fun right? The Bollinger band works on mean reversion of the price, and here is how it works: Whenever the price hits the lower band, it indicates the oversold, which is a favorable condition to predict a backward bounce towards the middle band.
In contrast, the sign of overbought conditions through price activity revolving around the higher band is anticipated to be a pull to the middle band. However, the strategy is risky as Bollinger bands tend to produce overbought and oversight signals too quickly and may result in the wrong trade.
Gann Trend Following Strategy
Here comes the involvement of mathematics to ace trading strategy. This strategy is based on Gann’s Theory of evaluating resistance and support levels.
However, the Gann Theory involves angles and geometric patterns in price movements to identify market trends and breakouts. Afterward, you can firmly grasp the trend and align each step by utilizing diagonal support and geometric angles to predict price trends, exit and entry points.
All Things Considered
Making profits on forex market might sound complex, but leveraging different trading strategies can boost your portfolio and also helps you to make high profits. That said, we have mentioned best trading strategies for professional trading.