Forex trading strategies

Forex trading strategies are techniques used for correct forecasting of rates and making transactions. The main goal of a trader is to make a profit by selling/buying currency. The strategy helps to choose the right volume and the right time.

Forex strategies can be based on technical, fundamental, sentimental analysis. It is best to use all three types of analytics. A strategy is usually accompanied by signals that dictate whether to buy or sell. 

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Forex strategies - basics

Forex strategies can be executed manually or by machine methods. 

  • Manual systems mean that a trader follows the charts in the terminal and interprets them correctly. 

  • Automated systems mean that a trader develops an algorithm (a robot) that analyzes the market, finds signals and makes deals. In this case, everything depends on the experience of the trader, who sets up the script.

Beginners start with simple strategies. They may notice that a currency pair tends to "bounce" from some price levels (called resistance and support levels). This behaviour is a signal for decisions. Beginners then decide to add other elements to make these signals more accurate.

Strategy Elements:

  • Market Selection - a thorough study of the selected currency pairs.

  • Position size/money management - how big lots can a trader trade at a reasonable risk level?

  • Entry points - development of rules, when to open a position (buy/sell currency).

  • Exit points - including those from a losing position

  • Tactics - a set of tricks, how exactly to implement transactions

  • Time management 

Examples of day forex trading strategies

Here are some examples of trading strategies. Day trading strategies provide an opportunity to earn on small price movements during the day.

Breakout - a trader opens a position when the price breaks the resistance/support level. After this event, the volatility increases, and prices often move sharply on the started movement.

  • Scalping - profit on minute price changes.

  • Momentum - a strategy based on news. 

An example of intraday trading - 50 pips a day forex strategy. The trader works with an hourly schedule, starting precisely from 7 a.m. GMT. At this time, the European session (London) opens. Besides, in summer, the end of sessions in Sydney and Tokyo are imposed on this hour, and at 8 a.m. GMT starts the first period of the day when it is best to trade. You can easily find this strategy on the Internet. However, make sure you try to understand every aspect of it! This way, you will increase your chances of success.

Swing trading strategies

Swing trading strategies focus on finding significant highs and lows. The trader sells at peak (because the price will fall further) and buys at the failure of the chart (because the price will rise further). These strategies involve holding a position for more than one trading session, from a couple of days to several weeks or a couple of months.

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For a good selection of swing strategy should be studied technical analysis: trends, patterns, indicators. Traders pay attention to:

  • moving average crossovers

  • head and shoulders patterns

  • flags and triangles

  • reversal candlesticks and others

Forex in 2020 may become even more complex and unpredictable. However, now is the time to catch opportunities by the tail!