What Is The Best Forex Strategy?
Experts say that the share of the foreign exchange is bigger than the stock market. What’s more, according to some estimates, the Forex market is the biggest financial market around the globe.
Major Forex players are usually financial institutions. For example, they can be banks, hedge funds or money managers. A relatively small part of Forex volume is taken by individuals. They are also called retail traders because they use Forex to make money on trading.
Forex trading is extremely important in today’s world. In fact, it helps to shape business, having effects on the world’s economy. But to benefit from foreign exchange, one needs to apply the right strategy. How to choose it? Let’s consider some of the best options.
If you are looking for a simple yet reliable approach, you should try Trend Trading. As you may grasp from the name, this method requires you to trade in the direction of the existing trend. By the way, trends can be easily defined by the best forex EA 2022 or so-called expert advisors. It’s easy to use them and with their help, you can analyse not only trend direction, but also its duration as well as strength. All you need to know with this strategy is when to exit your current position so that you can lock in gained profits and limit your money losses.
In Position Trader, you’ll have to hold your position over a long period. Depending on the market situation and your skills, it can be from a few weeks to 2-3 years. So this is a long-term approach that requires a macro view. With Position Trading, one should ignore small fluctuations taking place in the market. This approach also relies on analytical data, such as moving averages as they help to determine the best entry and exit positions.
With this method, you need to consider support and resistance. Their levels are basically the highest and lowest ends that currency price hits before going in the opposite direction. Together these two make a so-called bracketed trading range, so that’s the reason why this approach is called Range Trading. And what tools are needed to implement this strategy? You should apply RSI and a stochastic oscillator for defining some overbought and oversold conditions.
As said above, Forex is linked to the global economy. Foreign exchange is largely influenced by world economics. That’s why it’s essential to understand economic news and the impact it may have on currency pairs. With the News Trading method, you can predict both daily market movements and breakouts. In this case, you are supposed to rely on economic calendars and indexes. For example, you must consider CCI or the consumer confidence index as it defines in what direction price will move.
This approach emphasises short-term price surges, so it’s a trend strategy that follows frequent price changes. Of course, small fluctuations may go against major trend directions. That’s why Swing Trading requires a limited outlook. You may examine the foreign exchange market every hour or day instead of analysing overall trends. What’s more, you have to take quick action. By the way, traders also should hold their position overnight to benefit from trading.
This is one of the most popular strategies used nowadays. Scalping is ideal for those who are not ready to take big risks. With this approach, you will have to conduct an ongoing analysis of price movements. Scalpers buy and sell currency pairs to shave small profits from each trade. For this purpose, they rely on the spread and collaborate with brokers to have access to lower spreads. They also need to use special tools to conduct technical analysis and recognise patterns, while taking into account economic events.
So what’s the best foreign exchange strategy? It’s hard to give an answer that will be universal for everybody. In this article, we’ve considered some of the best approaches you can try today. It’s completely up to you what method to choose when using Forex. Most importantly, consider your needs carefully. Hopefully, this article will help you succeed in trading.