Successful forex trading systems

First, test each strategy via backtesting, which can be done with the popular MetaTrader forex platforms if you have modest programming skills. Vet your strategy in a demo account that most online brokers will allow you to open without risk.

If any strategies still look profitable, you can start trading them in a live account for the ultimate test. Select a strategy that best suits your particular situation, including your available time, personality type and risk tolerance. These are covered below based on the typical time involved, ranging from short to long term. Scalping Scalping is a very short-term trading strategy that involves taking multiple small profits on trading positions with a very short duration.

Scalpers need ultra quick reaction times because they usually enter and exit trades in just seconds or minutes. This very fast paced and a rather stressful activity that may not suit everyone. Scalpers also closely monitor price charts for patterns that can help them predict future exchange rate movements. Scalpers generally do best using a broker with tight spreads, quick guaranteed order executions and minimal or 0 order slippage.

Day trading would be suitable for investors who are very self-disciplined and are not afraid of highly liquid forex pairs. Pros: No overnight risks. Day trades are opened and closed within the same trading day. Cons: Time-consuming and stressful.

Day trading takes all investors' time, attention, and energy. To mitigate possible losses, they have to continuously keep track of market conditions, indicators, charts, etc. High potential losses. While gaining the necessary experience and skills, day traders have to be ready to suffer significant losses.

Position Trading Position trading is a long-term technique that can last for several months or even years. Thus, investors tend to concentrate on long-lasting trends rather than on short-term market movements. This trading style may relate to passive trading, however, in contrast to the buy-and-hold approach, position traders may take advantage of both bull and bear markets. When it comes to instruments, position trading implies the use of both fundamental and technical analysis to identify the trend, stop-loss orders to control the risks, and others.

This trading strategy is not very common among forex traders, yet can fit someone who is not aimed at active trading and is good at analyzing macro market factors. Pros: Less stressful. Being a passive trading style, position trading doesn't require full-time engagement.

Cons: High expenses. Holding a long-lasting position is expensive. Investors have to understand that their capital will be locked in the account for a long time. Moreover, they will have to pay additional fees and commissions. Range Trading Range trading is a forex strategy focused on the concept of support and resistance levels. Support represents the highest level that the asset price reaches before turning backward while resistance is the bottom of the price level.

Thus, a trading range is a difference between these two levels over a certain period. So, when the forex pair price is expected to reach the support level, investors anticipate and buy the asset, when the price is reaching the resistance level, speculators tend to sell. To identify trading ranges investors usually turn to technical analysis and its tools. This forex trading strategy will fit confident, decisive, and disciplined investors who can react fast when the range timeframes are tight. Pros: More trading possibilities.

This strategy allows investors to take advantage of non-trending markets. Facilitated decision-making. Comparatively lower risk. Since range trading is more about short-term trades focused on small profits, it comes with a lower level of risk compared to other trading styles.

Cons: Steep learning curve. Traders should devote much time and effort so that they could understand how to use technical indicators to successfully define the trading range. Range trading is usually associated with quite often investments, extra fees, and commissions. News Trading News trading is one of the popular forex trading strategies.

It suggests that investors try to profit from market fluctuations caused by important global events. The news, influencing the currency pair movement, usually relates to major economic reports GDP level, rate of inflation, etc. Due to high market volatility, this strategy comes with high risks, thus, will be more suitable for traders who are ready to accept it. Pros: High potential profits. News can make the asset price soar or drop at once. Thus, if investors can anticipate such moves, their income may surpass the profits gained from other trading strategies.

However, news trading requires significant understanding of the markets and the potential effects of events on market prices. Cons: Misleading information. Some market news may turn out to be fake, which can result in substantial losses if investors fail to recognize it in advance. Much knowledge. News traders need to stay always up-to-date and know how to interpret important market information.

Retracement Trading Retracement trading is one of the effective forex trading strategies that implies that investors try to profit from temporary pullbacks in the direction of the main market trend. There is a difference between retracement and reversal. While the latter is a huge change in the market trend, retracement is only a short-term deviation. Once having defined a change in the asset price up or down as a retracement, traders may hold it, expecting the return to the major trend.

In contrast, if the change in the asset price is considered as a reversal, traders are likely to close their existing position and enter a new one according to the market conditions. One of the most common instruments used by investors following this strategy is Fibonacci retracements.

Pros: Understanding of market moves. Cons: Long learning curve. Traders need much time to get a complete understanding of retracement tools to implement them effectively. Grid Trading Grid trading is a breakout forex trading approach that involves setting stop-loss limits above and below a certain asset price. This technique allows traders to take advantage of both trends and ranges.

For example, when focusing on the trend, investors place buy orders above a certain price and sell orders below it. Since grid trading can work efficiently without much market forecasting, it could be a perfect strategy for beginners.

Pros: Automation. Easy to implement. Cons: The temptation to reap quick profits. Many traders get obsessed with grid trading opportunities and lose their patience. As a result, they often fail to stick to their predetermined risk management plan and end up with significant losses. Carry Trade Carry trading is one of the most widespread forex trading strategies. It implies that investors try to gain returns from the difference in the interest rates of two forex currencies, making the pair.

Pros: Additional profits. Not only do traders could benefit from forex pair price movements but also from the accrued interest. Leveraged positions. Carry trading is usually based on the use of high leverage, which can magnify potential profits. Still, remember that leverage raises not only potential profits but also multiplies losses. Cons: Leverage. It can be either advantage or disadvantage since both the profit and the losses are calculated based on the full position value.

High volatility. Summary There is a big variety of strategies for trading in the forex market. All of them have a different level of risk, distinguishing features, advantages and disadvantages. Last, but not least, remember that forex trading comes with not only high profit potential but also particular risks. FAQ Which is the best strategy in forex? There are no best or worst forex trading strategies. All of them can be efficient in particular market conditions.

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