All the Best Forex Strategies That You Need to Know
Forex, short for foreign exchange or FX, is the transaction involving the change of one currency into another. Forex can be performed for several purposes such as commercial, tourism, and enabling international trade. The FX market refers to the global marketplace where investors, banks, and institutions gather on a single platform to speculate on currencies.
Forex Market Explained Easy
Undeniably, the Forex market is by far the most influential financial market with the highest liquidity in the world. The entire market’s worth is estimated to be around $2.4 quadrillion, $2409 trillion. Needless to say, the market is breaking bounds, snowballing every day, and has risen by a drastic difference compared to the previous years. All the trading is done electronically through computer networks, known as an over-the-counter (OTC) market.
How to Make the Most Profit With Forex Trading?
The market is highly volatile due to geopolitics and global economics. The main objective of traders is to gain profit from the market changes.
Here are some Forex trading strategies that can ensure maximum profit.
- Follow the Trends
As the title suggests, this strategy is all about using the market trend mechanism and taking advantage of the long-term goals. Traders opt for the Forex trend following approach using moving averages, channel breakouts, and current market price circulation to determine the market’s direction.
Traders choosing this strategy don’t have to make predictions or forecast price levels; they just go along the trends. However, there’s a deployment of a risk management component using the market volatility, ongoing market price, and the number of held shares.
2. Scalping Strategy
Forex scalping involves a significant number of trades, with each transaction making a minor profit individually that adds up to a greater sum. A trader can expect a profit of 5 to 10 pips per trade with the scaling strategy. However, this strategy can be a pretty challenging endeavor as you are constantly required to analyze the Forex market and place multiple trades.
It wouldn’t be wrong to say that using scalping strategies is a full-time job. Plus, if you decide to scalp currencies, you need to be prompt with your predictions if you want your scalping strategy to succeed. You will have to open and close positions in a matter of no more than seconds.
3. Bollinger Bands
Bollinger Bands are more of an analytical tool than a strategy. John Bollinger created the tool in the early 1980s. The need to adapt trading bands and the fact that solubility was dynamic instead of static gave rise to these bands. This tool is used to measure the highness and the lowness of the trade price relative to previous trades.
There are three Bollinger bands: lower band, middle band, and higher band. These bands help recognize a connection and allow traders to buy when the price hits the lower band and exit when it goes beyond the middle.
4. Forex Chart Patterns
It wouldn’t be wrong to say that charts and patterns are the backbones of Forex. A repeated pattern carries the potential to alter the price chart to a specific trend. Traders identify a direction to make future market predictions. At some point or the other, a pattern always repeats itself, so when it reappears, it can produce a beneficial outcome for the trader who’s been keeping an eye on the patterns.
In Forex, there are plenty of pattern types where two types of chart patterns are commonly used: Triangle and Head & Shoulders. Triangles usually occur more commonly in short-term time frames. They can follow an ascending, descending, and symmetric approach. Head & Shoulder could be regarded as a topping formation when an uptrend occurs.
5. Trading Breakouts
Breakout is a point where the market tends to break away or move away from a particular trading range. Breakout trading is all about excellent trading opportunities. The reason is that breakouts often lead to new trends and price moves. In this way, traders have a fair chance to enter the market at the right time when a breakout occurs. This ensures getting in early on a potential emerging trend.
Moreover, most reliable breakouts often take place on a high momentum. Hence, the price action traders can maximize their profits with prompt price moves. Breakout trading is undoubtedly one of the simplest and the most popular trading techniques used by many Forex traders, and for a good reason.
That being said, there’s so much more to Forex strategies than that. It’s a deep ocean that will take you a lot of time to develop an understanding. You will have your fair share of profits and losses, but at the end of the day, when you succeed as a Forex trader, all the hassle is totally worth it.