Learn Trading Strategies
Before coming up with a forex trading plan a trader must learn about the various trading strategies that they can sue to trade forex. Coming up with the right trading strategy can increase your chances of becoming more successful in forex trading.
For traders who want to learn about forex strategies there are 50 trading strategies listed in the trading strategies section of this strategy. This strategy section also shows traders how combine these strategies to come up with a trading system. The forex trading is a set of rules that will be used by traders to generate forex signals. For example the trading system rules will specify how two or more indicators will be used together to generate a buy or a sell signal.
As a trader the strategy you choose should be applied in your trading once you decide what type of trader you are & what type of trading method you will be using to analyze the forex market moves.
For examples you may decide you want to be a scalper you will use your scalping strategy and only open traders for a few minutes. If you're a trend trader you will use your trading strategy after you've decided the trend of the market. If the trend is upwards you will use your strategy to open buy trades.
If you are a day trade you will use your trading strategy to open trades that will only be opened for a few hours. Your trades should all be closed during the day and you'll not hold your trades overnight. As for the trading method which may be that of trend following you will first draw forex trend lines on the currency chart to determine the overall market trend & after that you will then apply your trading strategy to open forex trades.
In technical analysis there are various techniques used to trade currencies which a trader might use to ascertain which of these techniques of trading they will be using when trading the FX market. After choose in their trading method traders will then apply their trading strategy to open currency trades.
Types of Forex Trading Methods
There are two general methods of trading the currency market, these are:
1.Trend Trading
2.Range Trading
Trend Trading
In this method a trader will first of all determine the overall market trend before applying their trading strategy to open forex trades.
To determine the forex trend - this can either be an upward trend or a downwards trend.
A trader may use trend lines or moving averages to determine the overall market trend. After determining the market trend then the trader can use their trading strategy to open forex trades.
For example a trader may determine that the market trend is upward by using moving averages. The trader may then use a indicator such as Bollinger bands and open trades once the price retraces to the lower Bollinger band because this lower band will act as the support level of price. Therefore the trading strategy that the trader will be using is the strategy of resistance and support levels and the trader will be using Bollinger bands to determine these points and open and close trades based on these points.
Range Trading
Range trading is a method of trading currencies that move within a particular band of prices and only oscillates between these two points without moving much outside these two points.
A trader will then use the strategy of support and resistance to determine which levels to open buy or sell trades. The trader will draw a support line and a resistance line. The support level will be used to open buy trades and the resistance level will be used to open sell trades.
The most popular technique between these 2 is the trend trading method. Traders should always try to trade with the trend trading method as this technique is the most reliable technique when it comes to trading currencies. Even though sometimes the market will be trending and at other times the market will be moving in a range when the market is consolidating traders should try to trade the currency market only when there is a trend. After determining the trend traders will then use their trading strategy to determine when to open buy or sell trades that are in the direction of the overall market trend.
Once you have decided what type of trader you are: scalper, day trader or swing trader you should then come with the following:
1.Trading Method
2.Trading Strategy
After coming up with this 2 you will then combine these 2 & use these to detect when to buy or close trades.
You can then practice trading on the practice account so as to determine profitability of your method & trading strategy. You'll then use the results to improve the profitability of your method and strategy & once you have gained experience to trade with these 2 you can then open an account & start trading the live forex market.
