It is very essential to choose a Forex trading strategy that works, as trading without a trading strategy is like driving somewhere without a concrete destination. There are numerous Forex trading strategies, some rely on technical use of charts and numbers, and others rely on a profound understanding of the market with reference to current events. Here are 3 popular Forex trading strategies: Price action trading, Trend trading and Basket trading.
Price action trading
Price action is usually described as a “naked’’ form of trading, based only on price movements. In fact, the price decides whether a trader will open or close a position, it’s the major indicator as to whether a trader will ‘‘buy’’ or ‘‘sell’’. A lot of price trends repeat themselves and form patterns. In case there is any sign that prices are offset, this means that price action traders will exit. Since Price action is mainly focused on recent and past price movements, this strategy is dependent on technical analysis tools.
Trend trading is another popular trading strategy, widely used by new and experienced traders, because strong trends usually tend to produce the greatest results. This strategy is based on trends and the history of movements in currencies. 3 basic movements exist in the Forex market: uptrend, sideways and downtrend. With this strategy traders try to benefit from prices moving up, sideways or down. Put simply, trend trading refers to identifying the direction prices have been moving and then placing trades in that same direction.
Basket trading is rather effective and simple in use, it combines trading with different currency pairs at one time. One of the main advantages of Basket trading is that it gives traders the opportunity of placing several positions in just one order and allows them to be more efficient in managing their securities. With Basket strategy investors can tailor their investment portfolios to their specific needs and goals. There are different types of basket strategies, some of which are a combination of long and short positions, and others are based on all long or all short approach. The secret of this strategy’s success is in the way it is set up and managed. This strategy is important for institutional investors, as well as investment funds who want to hold a huge number of securities in certain proportions.
It is worth to mention that the top Forex trading strategy is determined by what suits you the most, which means that you can also develop the best trading strategy that will meet your trading needs. So, begin exploring other traders’ strategies, as it will help you find out what works for you.