Forex Trading Strategies
You need a trading plan; the trading plan would also contain your trading strategy. A trading strategy is a technique used by traders to determine when and how to execute a trade. Your trading strategy determines when you buy or sell currency pairs. There are many trading strategies but we can categorize them into scalping, day trading, swing trading, and position trading.
Scalping
Scalpers usually target small market moves. The moves could be as small as 2 pips to 5 pips. Scalping usually involves opening a large number of trades.
This trading strategy requires a lot of time and attention as trading opportunities could appear at any time.
Day trading
As the name implies, day trading requires that traders close their positions within a day. Day traders make fast market decisions as they get to execute trades multiple times a day.
Day traders do not open positions overnight. They mostly use the 15 minutes to 1-hour timeframe in making trade analyses.
Swing trading
The Swing trading strategy is a medium-term strategy. Swing trades usually last for days or weeks, and traders usually make their analyses on the 1hour, 4 hours and daily time frames.
Swing trading does not require traders to open trading positions often because they would not find their hedge often
Position trading
Position trading is a long term trading strategy. Traders implementing this have to understand the use of technical and fundamental trading strategies.
The position trading strategy requires a lot of patience because it takes traders a long time to find their hedge. Traders also have to wait for weeks, months or even years to get the trading result. Traders who trade using long term strategies usually concentrate on the daily and monthly time frames.
How to choose your trading strategy
Timeframe
You need to choose a timeframe that suits you. Things you might need to consider before choosing a timeframe are your trading goals, your daily activities and many more. Someone who cannot dedicate a lot of time to trading cannot use a scalping strategy. Such a person might also find it hard to use a day trading strategy. A trader who is more comfortable with daily profit and wants to dedicate his time to trading might be more comfortable with the lower timeframe strategies.
Number of trading opportunities
How frequently do you want to open trades? If you want to open more positions, you would have to go for strategies of a lower timeframe. If you do not have the time to open positions often, a higher time frame strategy like swing trading might be the best for you.
Conclusion
A good trading strategy is crucial to your growth; take your time to create a reliable strategy. Traders who trade without a strategy are bound to fail
Understand yourself
You also need to understand yourself and your trading needs. Some traders cannot stay away from the trading chart when they have an open position. Some people also might not be able to handle the pressure of opening many trades at a time.