Purchasing foreign currencies has become an increasingly popular activity, with many retail investors choosing to invest in the Forex market for short-term speculation. Anyone who wants to participate in day trading must be aware of all the different available strategies.
Forex traders must be aware of all the different strategies available when it comes to making money from this exciting market. In addition, anyone who wants to take part in day trading should consider learning how to identify buying opportunities even if prices appear to go down throughout the entire session. This can be achieved by using some of the strategies discussed below.
Five best forex trading strategies
The best Forex trading strategies for day traders are those that have short expiry times, e.g under 30 minutes, so they can be considered intra-day trading strategies. Here are five of the best forex trading strategies for day traders:
Range bound trading strategy
This involves figuring out the general price range in which a currency pair usually moves during one session. Once this is done, you would go long at support levels and short at resistance levels. To determine this range, it is helpful to use Candlestick charts which show the high, low and closing prices of a currency pair traded over a specific period (e.g. 1 minute). These charts cost $0.99 each; however, they are well worth the money to determine your trading range.
Fibonacci Retracement trading strategy
This strategy is used when anticipating a retracement in price back to crucial support/resistance levels, which can be identified with horizontal lines drawn between important tops and bottoms on your chart. The retracement level is usually somewhere near 61% or 38% depending on if you are looking for an ABC (i.e. wave A-C) type pattern or just a typical zigzag pattern that may not have corrective waves (A-B-C). You then look to go short at this level once it has been breached by enough candlesticks indicating strong momentum.
Elliott Wave trading strategy
This is a popular forex trading strategy, but it can be challenging to master. It involves looking out for five waves (1-2-3-4-5) in one direction (trending up or down). If these five waves are complete, they would indicate that there is likely to be another leg up/down. You then look to go long when wave three has been breached by a few candlesticks and short when wave five has been overcome by the same amount of candlesticks as shown on your chart.
Moving Average Crossover trading strategy
In this strategy, you place two moving averages side by side, usually a shorter-term average such as a 13 period SMA or EMA and a longer-term average such as a 34 period SMA. You then look to go long when the shorter-term average crosses over the long term average from below, indicating an uptrend is underway, or short when it crosses down from above, meaning there is likely to be a downtrend.
Stochastic Oscillator trading strategy
This strategy refers to using indicators developed by George C. Lane called stochastic oscillators. These are momentum-based indicators that tell you whether or not price action has recently become overbought or oversold, so consider previous highs/lows that have occurred in price recently and your current level of momentum (speed and direction). If you believe momentum is increasing, you will buy. If you believe momentum is decreasing, you will sell.
In general, it is best to be armed with several different Forex trading strategies when beginning your day trading or intra-day trading career. New traders interested in currency trading in india are advised to use a reputable online broker from Saxo Bank and practise their trading strategies on a demo account before investing real money.