Forex trading without a plan is like setting out on a journey without a map; you have no idea where to start.

You can remove some of the uncertainty when trading currencies with a well-thought-out forex trading plan. Keep reading to learn about the top forex trading strategies and how to select one for successful currency trading.

Scalping

Scalping is a trading strategy where several tiny profits are taken from very short-term trades. Since scalpers typically join and leave deals within a matter of seconds or minutes, they require lightning-fast reflexes. 

Scalpers also pay close attention to price charts in search of patterns that can be used to forecast the direction of currency prices. 

They frequently conduct analysis using extremely brief time frames, such as the EUR/USD tick chart presented below. Use of a broker like IFX Brokers with tight spreads, fast guaranteed order executions, and low or no order slippage is highly recommended for scalpers.

Day trading

Another type of trading strategy involves making trades exclusively within that day’s market hours. All trades are closed at the end of each trading day because day traders do not hold open positions overnight. 

When the trader isn’t paying close enough attention to the markets, this helps mitigate their risk. Daily price fluctuations are best analysed using technical analysis on intraday time frames, which is used by the vast majority of day traders. 

Though there are several approaches to day trading, one that has found widespread success is known as breakout trading. Trading is initiated when the price of a currency pair breaks through a predetermined level on a chart and is confirmed by a subsequent rise in trading volume.

News trading strategy

Even while news trading tactics are probably not the best choice for forex beginners, more experienced traders with substantial pockets and a healthy appetite for risk may find them useful. 

These approaches, which may be grounded on either fundamental or technical research, are designed to capitalise on the substantial volatility often witnessed in the foreign exchange market right following major news releases.

When trading news, it is common practise to keep an eye on economic calendars for the publication of important data. They then keep a tight eye on the market in the lead-up to the event in order to identify critical support and resistance levels, allowing them to act swiftly in response to the results. 

In such volatile markets, news traders must exercise extreme self-discipline when managing their currency positions through the use of stop-loss and take-profit orders.

Momentum trading

Swing trading, sometimes called momentum trading, is a trading method with a medium time horizon that tries to profit from large price fluctuations. 

Swing traders accomplish this by taking advantage of both big market movements and reversals by trading against them and holding overnight.

Momentum indicators that signal buy and sell prices are frequently used by swing traders. Forex traders use them to identify overbought and oversold markets.

Trend trading

Long-term forex traders sometimes employ a method known as “trend trading,” which entails capitalising on price fluctuations by betting in the direction of the market for a specific currency pair. This technique frequently entails purchasing on pullbacks in up trends or selling on rallies in down trends.

Also read: Choosing a Forex Broker in South Africa