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Trading Strategies – All forex strategies explained

Updated on: November 27th, 2020

forex strategies

Before you start Forex trading in Canada, you should definitely also deal with the subject of Forex strategies. Because at the end of the day you only have the chance to trade successfully with foreign currencies with a good forex strategy. There are now numerous forex trading strategies, so that in theory every trader can find the strategy that suits his personal attitude as well as the goals that are pursued with the speculation.

Even if forex trading itself is in fact speculative and risky, there are trading strategies that are described as very risky. As a trader you not only have the chance to use existing forex strategies, but in fact you can your own forex strategy. However, this only is sensible if you’ve got been trading exchange for an extended time and have already achieved success.

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Various Types of Forex Trading Strategies

The difference between a successful Forex trader and an unsuccessful one is the quality of the strategy they use. If you want to be successful, then you need to develop a good Forex trading strategy. A lot of things need to be considered when developing Forex trading strategies. You need to consider your peculiar trading style and expectations. A beginner may find it difficult to choose a Forex trading strategy. The information we provide here can help you to make the right choice.

Best Forex Trading Strategies in Canada

These strategies are often perfectly categorized into different approaches, but the art lies in combining. Because basically, the information of the technical, the chart and the fundamental analysis are necessary for a balanced trading strategy. This is often the best way for the trader to get a comprehensive picture of what’s happening and predict a trend. Strategies that are only based on one indicator can’t be successful in the long term.

Price action strategy

This strategy has to do with the study of historical prices. This will help you to formulate technical trading strategies. You can use price action as the only strategy. You can also use it together with some other Forex trading strategies.

Price action strategy

Price action does not involve fundamental analysis. It is purely technical. Be that as it may, some traders do add fundamental analysis to their price action strategy. Those who can use this start are:

  • Short term traders
  • Medium-term traders
  • Long-term traders

You can also use any timeframe for that matter when using the price action strategy. You need to develop an entry and exit strategy. Some of the methods you can adopt to enter and exit a trade are:

  • Oscillators
  • Indicators
  • Trend identification
  • Candlestick wicks
  • Fibonacci retracement

Range trading

This is one other worthy strategy among the available Forex trading strategies. In this strategy, you need to identify the support and resistance before making a trading decision. You can place your trades around these areas of support and assistance.

Range trading

The best time to use this strategy is when there is less volatility in the market. It is the best strategy when the trend is not discernible. Traders using this strategy focus on technical analysis to make trading decisions.

The strategy can work within any timeframe. You need to have a good risk management plan to make this strategy profitable. This is because a breakout can occur at any time and spoil the trade. You can predict a perfect entry and exit point by suing oscillators. Good examples of these tools are:

  • Relative Strength Index (RSI)
  • Commodity Chanel Index
  • Stochastic Oscillators

You can use price action together with this strategy also. Price action can help to validate the range-bound breakouts or signals.

Trend trading strategy

This is yet another outstanding strategy to consider Forex trading strategies. The strategy requires that you follow the trend to trade Forex. The strategy can be used by traders with different experience levels. All you need to focus on is the directional momentum of the market.

Trend trading strategy

The range of trading can be long term or short term. The trader can also analyze the market across several timeframes. The trader can identify entry or exit points by using oscillators. Examples of oscillators you can use for this purpose are:

  • CCI
  • RSI
  • Etc

You can make more out of this strategy by adding a good knowledge of price action to it. For example, the knowledge of price action can tell you when a reversal is about to take place. You can know this by using the specific shapes of candlesticks. This is one of the most popular of all Forex trading strategies. A common saying in Forex trading is that “Trend is your friend”. The trend trading strategy will bring so many trading opportunities. Its risk-to-reward ratio is also favorable. However, you will need to invest a lot of time before you can detect entry and exit points. You will also need to know a lot about technical analysis before you can use this strategy.

Position trading

It is one of the best for those looking for long-term Forex trading strategies. It is focused mainly on the use of fundamental analysis. Be that as it may, some traders also use technical analysis for trading the strategy. A good example of technical analysis you can use in this regard is the Elliot Wave Theory.

Position trading

This strategy does not give attention to smaller fluctuations or movements in the market. This is because such smaller fluctuations do not affect the bigger market picture. The strategy is good for Forex trading. You can also use it in several other markets, like stocks trading.

As we mentioned earlier, this strategy is a long-term Forex trading strategy. Those who use it usually leave their positions open for weeks, months, or even years. You can only use this strategy if you are a patient trader that is ready to persevere. Before you can use this strategy, you need a good knowledge of fundamental analysis. You will also find technical analysis knowledge to be helpful. You will need to know how to identify key levels on longer time frames. You can use technical analysis to determine your entry and exit points when using this strategy. The strategy may not be the best for a beginner. You need a good understanding of the Forex market for you to be able to use it conveniently.

Manual strategies

With manual strategies, the trader has to instruct each trading activity himself. He not only has to set the positions himself, but even have an eye on the indications, charts and market news in order to be able to act if necessary. However, this doesn’t mean that no tools are used. Of course, the technical and fundamental indicators that trigger trading signals are also used here.

Manual strategies are best fitted to professional traders and full-time traders. They have a constant view of the present developments and can keep track of their strategies even without automated orders. Therefore, they react to cost developments taking into consideration all information that may be recorded. This implies that higher profits are possible, but there’s also the risk of higher losses, as stop-loss orders aren’t used to hedge against risk.

Automated strategies

Automated strategies are offered by most brokers. Depending on the software, you’ll be able to create strategies yourself, the broker offers a variety of automated strategies or you can use social trading to copy the strategies of other successful traders and use them on your platform. Automated strategies are very suitable for beginners to grasp the market or for busy traders who don’t have that much time available. However, using automated strategies is no guarantee of successful trading.

The industry standard trading platform MetaTrader offers the Expert Advisor as an aid. This can be modified by some brokers and Fortrade even offers the EA Builder, with which traders can develop their own strategies. It’s not necessary to master the C # programming language. Initially, strategies can be built using the click & drop method.

The Biggest Mistakes Despite Forex Trading Strategies

Forex strategies is helpful in trading, but then they have to be followed consistently. Traders often make the error of not executing their forex trading strategies from start to finish and thus not having a reliable basis for comparison.

Focusing on too many currency pairs

The interchange market is relatively easy to understand, and this is why novice traders believe they can. As a result, not just single, but often several currency pairs are traded. At the same time, of course, because you want to attain trading success right from the start. While this enthusiasm is good, it may also be wrong. If there’s a positive trend on the market, it’s used immediately and, at best, invested with a large part of the capital.

Use trading strategies without a demo account

Another mistake, which isn’t so unusual, is deliberately not using the demo account. Even if traders have already traded with another broker, they should never be without opening a demo account with their new provider.

Traders are often too greedy

Successes make you want more and sometimes don’t make the risk seem so bad at all. Many traders can tell a thing or two about that. Once they have achieved their first successes in forex trading, they often become careless and cocky.

Conclusion: Forex trading strategies bring security when trading

There are different forex trading strategies that are either easy or more difficult to use. However, it’s recommended for all traders (regardless of whether or not they are a beginner or a professional investor) that a strategy is used. It offers optimal information and instructions on when the correct time to get in and out of your own investment is.

The Forex trading strategies above are just a few of the many available Forex trading strategies. As you can see, the type of strategy you choose depends on the type of trader you are. This means that long-term, medium-term, and short-term traders will need different types of strategies. So, you need to first determine the type of trader you are before you pick any Forex trading strategy. Most beginners prefer short term trading strategies, however.