If you are a good forex trader, you will probably know that choosing the best trading strategies for forex cannot be neglected. Trading forex without a strategy is just like a traveler that neither knows his destination nor has a map to track it.
A good trading strategy, when used well, helps in making a consistent profit. One of the benefits of using the best trading strategies for forex is that they help you set a profit target for a range of time (either monthly, weekly, daily, or any other period of your preference).
Once you master a particular forex trading strategy, it reduces the amount of work you have to do as a forex trader because the chart pattern will always come in a similar way.
Once you have determined your best trading strategies for forex, the next thing you need to do is to try to understand the signals it gives. Being able to do this will make trading easier as your remaining work will always be to identify the signals and place your trades.
The best trading strategies for forex will help you to model the sentiment you have about price action (market psychology, precisely). Trading strategies help you identify signals, and this, coupled with your technical analysis capabilities, will definitely boost your win rate in trading.
Factors used in picking the best trading strategies for forex
The main factor that you need to consider while choosing your best trading strategies for forex is your lifestyle.
This post will provide you with a review of the different trading strategies so you can be able to make your choices.
Because everyone has different lifestyle, there is no particular strategy that will be certified as the best.
When making your choices, you will want to choose a strategy that best suits the kind of life you live.
Once you have determined the best trading strategy for yourself, the next thing you should do is to venture into the skills that come after it. For a trading strategy to provide a consistent profit, you need to master it very well.
One of the ways to build your strategy is to try it on a demo account. There are several brokers that support demo accounts, but we are not going to get into that as it will make this post more diversified. You can check our post specially designed for that by clicking here.
When you have recorded a consistent profit on your demo account, you can now fund a live account by starting small. Once you continue like this, you will find yourself in a better position with the strategy overtime.
Here is a summary of the factors used in picking the best trading strategies for forex:
- Time
- Risk Tolerance
- Personality
- Position size
- Trading Opportunities.
Best trading strategies for forex
When you have considered time, capital, and position size as they will affect your trading journey, then choosing the best trading strategies for forex will be very easy for you.
Having contacted some of the most successful forex traders, we have figured out the top 4 trading strategies that a high percentage of individuals uses.
Here’s a summary of the top 4 best trading strategies for forex:
- Scalping strategy – This strategy is best for a highly volatile market.
- Day trading strategy – This strategy is best for risk-free trading.
- Position trading – This strategy is the least stressful.
- Swing trading – This is best for medium-term profit potential.
1) Scalping Strategy.
This strategy is best for a highly volatile market.
Why do we say that?
It is best because it signals a small market movement.
Traders adopting this type of strategy try to make a large number of trades per day in order to make large profits. In forex, there is always a swing in the price action, and any person using this strategy will always identify and take advantage of it.
Advantages of scalping strategy:
- Best for volatile market
- A large number of trading opportunities
- The best option for full-time traders
- Profit is targeted at smaller sizes.
- Scalping requires less market knowledge–helping newcomers.
- Forex scalping has low barriers to entry, making it good for retail forex traders.
Disadvantages of scalping strategy:
- It requires too much time.
- Constant internet connection.
- It is some worth risk
2) Day trading
Day trading is a trading strategy in forex in which an individual buys or sells holdings only during the day.
This strategy is best for risk-free trading.
Why do we say that?
Day trading is considered a risk-free market because you are more likely awake during the day. When trading forex overnight, it is possible that you will fall asleep and the market will move unexpectedly.
Advantages of Day trading:
- It is less risky.
- A large number of trading opportunities
- Day traders take advantage of market news.
- There are numerous timeframes to choose from.
- Easy to get started.
- Free resources.
- You’re in control of your destiny
Disadvantages of Day Trading:
- Environmental distraction
- It gives you less chance to do other things.
3) Position Trading
Position trading is a strategy in which traders identify a trend and then buy and hold an investment that will benefit from it. It is a long-term trading strategy in that it takes a longer period of time to identify opportunities as their positions usually take months or even years to play out.
This strategy is the least stressful.
Why do we say that?
Position trading is a less stressful strategy for trading forex because trends usually come once in a while, and for that, the trader has less work to do. Position trading also gives you the chance to adopt other trading strategies. For example, you can practice intraday or swing trading strategies depending on the trend.
Advantages of position trading:
- Less stress
- Maximum profit
- Minor fluctuations do not affect the market.
- suitable for combining with other works
Disadvantages of Position trading:
- It needs patience in the market.
- better with a large lot size.
4) Swing Trading:
Swing trading is a trading strategy in which traders identify a swing (which usually takes a couple of days to months) and enter the market in other to take advantage of the price action. It is sometimes referred to as a mid-term trading style.
Traders adopting a swing trading strategy make profits by identifying “swing highs and swing lows” and trading in the direction to benefit from them. You can learn more about swing trading by clicking here
Swing trading is best for medium-term profit potential.
Why do we say that?
Swing trading is best for medium-term potential because it is centered on the most significant portion of the market.
Swing trading requires less technical analysis as compared to those of short-term or long-term trading strategies in Forex.
Advantages of swing trading:
- Trading takes less time than day trading.
- By capturing the majority of market swings, it maximizes short-term profit potential.
- Traders can rely solely on technical analysis, making the trading process much easier.
Disadvantages of swing trading:
- It captures only part of the trend.
- Expect greater losses.
Conclusion
There are a lot of factors to consider before choosing the best forex trading strategy for you. The one that I deem best may not be the one you prefer. As we provided some of the factors used in determining the best trading strategies for forex, it is very important that you go through them and use those factors in determining your preference.