Forex trading sounds simple, in theory. You pick a currency pair, buy it at a low price, and sell it at a high price. So, you should have a 50% chance to predict the pair’s evolution right and make money from trading currencies. But this couldn’t be farther from the truth because 95% of Forex investors fail to gain money. So, is it worth becoming a Forex investor? It’s totally worth it because you can build a career in the sector if you use the right strategies and gain a set of skills.
Your forex trading strategy tells you how to manage trades, when to enter and exit trades, and how to identify profitable trades. You could use hundreds of strategies, but you don’t know which one to pick if you’re a beginner. Forex analysts and seasoned traders are constantly developing new methods to help beginners find the best point and time to enter or exit trades.
What is a Forex trading strategy?
The path to building a successful Forex trading is to work with a strict set of rules and understand that trading currencies is a game of probability. Keeping these two realisations in mind helps you to boost the potential for gaining consistent income. This article won’t discuss all trading strategies but will provide you with a glimpse at the ones that can improve your technique in 2022.
Seasoned traders see Forex trading as a psychological game where you don’t have to let your emotions and mindset control your actions. When selecting a strategy, ensure it fits your trading style and personality. Even the best strategy fails when you don’t implement it properly.
Professional traders prefer strategies that:
– Enable them to manage their risk according to their accounts’ size
– Have a stop loss
– Allows them to trade Forex at logical levels on charts
In addition to the following advanced Forex strategies, Forex copy trading is a new concept that can improve your trading success. It allows you to automatically replicate successful traders’ trades, making it an excellent option for beginners. You can learn from experienced traders and avoid costly mistakes with copy trading.
Advanced Forex strategies you can use in 2022 to boost your success
Bollinger band Forex strategy
The Bollinger band Forex strategy can help you establish resistance and support lines that might be present in the industry. The Bollinger tool includes:
- Three bands.
- The central line is a simple moving average set to a time span of 20 days.
- Two lines that measure the market’s volatility.
The upper and lower lines widen when the market is highly volatile and get close together when it’s stable. You can identify the points of resistance and support when the price crosses the Bollinger line. When this happens, the market’s movement can be temporary, and the currency’s pair will most likely bounce back, or the market will burst forth. You can use the bands to establish the entry and exit points for trades because they can serve as placing stops and limits.
Momentum indicator Forex strategy
You can use the momentum indicator to track the most recent closing price and compare it with previous closing quotes. The tool displays it as a line on a separate chart below the primary price chart. The indicator migrates to and from a centreline of 100. Its movements show how the price evolves. You can use momentum indicators when you need oversold or overbought signals. It’s quite useful to determine how strong the market movement is and if the price moves up or down.
Before basing your investments on the momentum indicator, check if the market respected is previously to determine in what particular conditions it works.
Fibonacci Forex strategy
The Fibonacci retracements are helpful in identifying the areas of resistance and support. The tool uses horizontal lines to tell you the key levels. You find the Fibonacci retracement levels as six lines drawn on the asset’s price chart. The first three show the lowest 0%, average 50%, and highest 100% points. The others are drawn at 23.6%, 38.2%, and 61.8%, which are crucial lines in the Fibonacci method.
This strategy is sound when you spot where to place an entry and exit order. The secret to successfully using it is to identify the stop-loss below the previous uptrend and above the previous downtrend.
Bladerunner Forex strategy
If you need a strategy that enables you to compare the current market price of a currency or pair to the level the indicator shows, Bladerunner is perfect. You can tell when the ideal entry and exit points are for your trades by checking its disparity. Forex professionals named the method Bladerunner because it acts like a knife-edge separating the price.
The Bladerunner method works in accordance with the pivot points, price action, resistance and support levels, and candlesticks to identify new trading opportunities. You can use it only if the market is trending. It’s recommended to combine it with the Fibonacci method, no matter which Forex broker facilitates your trading, to validate your predictions and provide an extra layer of security.
Bladerunner utilises the central line of the Bollinger band, so if you notice that the price is above the exponential moving average, it’ll most likely decrease shortly. Experts recommend waiting for the price action to reach the exponential moving average to ensure the price will rebound.
Price action trading
This technique is usually popular with seasoned Forex traders who prefer it because it’s not time frame-dependent. If you use it, you can trade using both the five-minute chart and the daily chart. The price action trading strategy requires no technical indicators because it aims to educate you to read how the price evolves without the influence of a technical indicator.
Professional investors use candlestick charts when integrating this strategy into their trading. If you analyse the close of a candle (that can close at an established frame or hourly), you can predict what is happening with price action. You can also use the candlestick charts to identify shapes and patterns on the charts and determine how the market moves.
When the market isn’t trending, you cannot use this strategy because it’s designed to serve you only during ranging points.
Use all of the above strategies to practice your trading skills and improve your performance.