DEFINITION of ‘Forex Trading Strategy’ A set of analyses that a forex trader uses to determine whether to buy or sell a currency pair at any given time. Forex trading strategies can be based on technical analysis, chart analysis, or fundamental, news-based events.
There is no one strategy that is suitable for everyone. Everyone’s perfect strategy is different and depends upon one own personality, priorities and expectations regarding their trade. Therefore, everyone would have to go through a phase of experimentation to figure out the best trading strategy suited for them.
Though the most important concept for any trading in forex or any other market for that matter is discipline. The trading strategy provide you with a set of rules to follow during each trade and this instills a certain discipline in all the trades.
A lot of the time when people talk about forex strategies, they are talking about a specific trading method that is usually just on facet of a complete trading plan. A consistent and successful trading strategy would provide
- Selection of Market: which pairs of currency to trade
- Position Sizing: to determine how large each position is to control for risk taken in each individual trade
- Entry Point
- Risk management
- Exit Point
The other important concept in trading are the trading styles, from short time frames to long time frame. The popular choices from the list of best trading strategies in terms of time span are:
- Scalping: these are very short-lived trades possibly held just for a few minutes
- Day trading: trades closed before the end of the day, to avoid the drastic fluctuations during the night
- Swing trades: positions held for several days, looking for profits from short term price patters.
- Positional Long-term trading: seeking to maximize profit from major shifts in prices
The bottom line: A forex trading strategy is a set of analyses that a forex trader uses to determine whether to buy or sell a currency pair at any given time. These strategies can be either manual or automated in nature and can be purchased off-the-shelf or developed internally. Traders developing their own trading systems should be sure to back test them and paper trade them to ensure that they perform well before committing real capital.
Great content! Love this part of your website!