12 Forex Trading Strategies That Will Make You Money

Forex Trading Strategies

How to Choose the Right Forex Trading Strategy for You

Forex trading strategies are one of the most important foundations of the trading process. They determine all the steps you will take, from the currency pair and timing to the value of the transaction.

But it's not easy, it takes a lot of experience and practice to be able to own a trading strategy that guarantees you profit that matches your goals.

Due to the existence of many forex trading strategies that are impossible to try all of them for yourself and judge them, we have prepared this article.

In it, we have gathered for you the most important and prominent forex trading strategies and the most used by professional traders so that you can try them and profit from them with ease.

What are forex trading strategies?

During the trading process, entries and exits are made in a specific way and at a specific time, in order for the trader to ensure that he gets the maximum possible profit.

Forex trading strategies are simply a methodology based on different analysis techniques that traders use to get the best results according to the data of the transaction they are undertaking.

Some people also refer to it as the trading style used to achieve the maximum possible profit margin from each transaction.

Forex trading strategies vary greatly from each other, some are short-term and long-term, some require continuous monitoring and review, and some do not require that.

In short, the importance of forex trading strategies lies in trading in a more systematic way and guaranteeing greater profit than trading without a strategy and randomly.

12 Forex Trading Strategies Used by Professionals

1. Trend Trading

One of the simplest and safest Forex trading strategies, it simply involves trading in the direction in which the market is moving, hoping that it will not change for a long period of time.

All markets have a certain direction, whether it is uptrend, downtrend, or even sideways. Based on studying market movement, technical analysis rules, and recurring patterns of market movement, traders can easily identify the direction of those markets for a good period in the future, and trade based on those data.

This type of strategy is one of the long-term methods compared to other methods, as the trade may last for days or weeks depending on the strength of the trend.

Of course, this strategy is not completely safe and has some risks. Any sign of a reversal in the price direction can unfortunately fail your strategy altogether.

In most cases, there is no way to avoid small price fluctuations during the trade, but with the continued general trend, the final profits will exceed those small losses.

In general, it is recommended to buy if the market exceeds its highest price in the last twenty days, and sell if it reaches its lowest price in the same time frame.

2. Scalping Trading

The scalping strategy is one of the Forex trading strategies that primarily depends on making a large number of trades in a short period of time, and exiting them with small profits that come together to form a satisfactory profit.

When we say a short time period, we mean a period that lasts for a few minutes only, and by collecting the points you earn in each operation throughout the day, you will have made reasonable profits.

Like any trading strategy, it requires considering some elements, most notably the technical analysis and the speed of the trading process.

In this type, the trade usually lasts from one to five minutes, and you open a large number of trades throughout the day.

However, even if you take all of those factors into account, scalping is still considered by experts to be one of the riskiest Forex trading strategies, especially for beginners.

Besides the fact that it requires monitoring charts closely throughout the day, it also requires cool nerves and the ability to make the right decision at the right time.

Before you start trading with it, make sure to set your limits clearly and not to compromise them, so that you don't end up losing, and it will benefit you a lot in this method to know the news of other financial markets.

3. Position Trading

A strategy dedicated to the most patient traders and the most able to withstand market changes and fluctuations in the short term.

It is based primarily on leaving the trading deal open for a long period of time and achieving a fixed profit percentage in that period.

This period may vary from person to person and from market to market, as it may last for several weeks, months, or even years, so you must have a more comprehensive view of the market than any other strategy.

This strategy is very useful for those who cannot dedicate time to trading on a daily basis, as it will not require hours every day like other Forex trading strategies.

But on the other hand, it requires the trader to be disciplined and to remain firm in the face of small recurring market fluctuations.

In general, position traders use the trend trading strategy at the same time to identify the expected path that the market will take in the long term and to identify the ideal points to open and close the trade.

As we mentioned, this method works to generate regular profits over long periods of time, and therefore, through a good understanding of the market and the use of risk management appropriately, you will be able to greatly reduce potential losses.

4. Daily Trading

The fourth strategy of forex trading is self-explanatory, as it is about opening a trading position for only one day.

In this strategy, you take advantage of the fluctuations that occur during that small period. This point saves you a lot of time and effort spent on research and monitoring.

All that matters to you is the movement of prices within one day. You will also avoid the pressure and tension that accompanies those who leave the position open for a long time.

In general, a position under this strategy lasts for several hours during the day and is not left open overnight. Profits can reach 100 points due to its relatively long time frame.

Like other forex trading strategies, you will need to do your research and monitor the market with your expertise and skills.

It will also be very beneficial to keep up with the news of the assets associated with the currency pair you will be trading on that day, as well as global economic and political events in general.

Due to the fact that this strategy is short-term, one of its disadvantages is that it is largely unpredictable. Even if you follow all the necessary steps, this limited time context still makes it difficult to analyze the market.

5. Swing Trading

It is about opening a trading position and keeping it open for several days or weeks, with the aim of taking advantage of price fluctuations during that period.

This swing trading strategy is not as long-term as most people think, but it can be classified as medium-term.

In comparison to many other forex trading strategies, users of this strategy take on high risks, but on the other hand, they earn much higher results than others. In general, high profits come with high risks.

Despite the fact that it is not a short-term strategy, the user must take into account all short- and long-term changes.

This is to be able to determine the price path and the trend path, and thus exit the position at the right time, achieving a profit that satisfies you.

However, due to the relatively long period that this strategy lasts, those who apply it must be patient and focus on the big picture instead of the small changes that do not change the course of the transaction.

To exit this strategy with the best results, make sure to review price movement averages, momentum indicators, and macroeconomic and partial indicators.

Forex Trading Strategies

6. Grid Trading

One of the relatively new forex trading strategies, it is about generating profits from the natural market movement through pre-defined stop-buy and stop-sell orders placed before the start of the trading transaction.

This strategy is called a grid because the trader creates a network of operations that generate profits from both rising and falling market movements. These operations vary greatly depending on the trader's preferences.

One of the most important advantages of this method is that it allows you to significantly reduce your losses in the event that the market moves against you. The organized approach you follow to organize it also makes you avoid making emotional decisions during trading. All operations and responses are pre-configured.

On the other hand, incorrect and poorly thought-out setup of your order network can lead to a lot of losses. It is also a bit complex and is not suitable for beginners at all.

Even though you will not have to know the direction of the market or be glued to your computer to execute this strategy, you will need to supervise it closely.

Keep in mind that it is high-risk in addition to having limited profits. It works to generate steady profits over time.

7. Range Trading

In Forex, there are what are called support and resistance lines, which represent the maximum and minimum points that the price reaches before reversing in the opposite direction. This is the crux of this important strategy of Forex trading.

It works on trading in the range that encloses the two points, meaning that the trend is more like a sideways line. When it approaches the peak of buying or resistance, this is a sign of a reversal in the trend and traders sell.

On the contrary, when the line approaches the peak of selling or the support level, this is a potential sign of the start of a trend reversal and traders begin to buy.

Therefore, the users of this strategy are not interested in predicting the breakouts that occur in the market, but rather focus on stable markets whose trend is between the support and resistance range for as long as possible.

Traders of this strategy focus on achieving small and steady profits. They often use momentum indicators to identify support and resistance levels and to know the safe levels for them.

8. News Trading

One of the easiest Forex trading strategies to understand and apply, as it relies on following world news to know its potential impact on the Forex market and make a decision to buy or sell based on this.

Unlike many other financial markets, the Forex market is a multinational market and is clearly affected by global economic and political events or even natural disasters and unexpected events.

The most prominent events that attract the attention of traders are the changes that occur in interest rates on a regular basis, in addition to inflation rates, gross domestic product, unemployment rates, and consumer confidence surveys.

Of course, there are an unlimited number of events that can occur and change the direction of the entire Forex market, and it is impossible to determine the amount of impact of each of them, but this depends on the timing and details of the event.

Despite the profitability of predicting the breakouts that will occur in market prices correctly and taking the decision to buy or sell, it carries very high risks. Entering the trade too early can cost you a lot if the breakout does not occur at the time you plan.

You can rely on reliable news sources, such as CNN, Reuters, or other reliable global news platforms.

9. Breakout Trading

We mentioned in several Forex trading strategies the breakout and its importance in Forex trading, but this method is the most one that depends on it.

The breakout is simply the price breaking one of the support or resistance levels, which represent the maximum and minimum points that the price can reach before reversing again.

When this breakout in price occurs, it usually lasts for a certain period of time, which can be short or long. The more you can buy at the beginning of the breakout, the greater your chance of profiting from it.

However, besides being a relatively profitable strategy and relatively easy to apply, it is on the other hand difficult to predict.

It is also dangerous due to market conditions, the constant changes in support and resistance levels, and hundreds of other expected and unexpected factors.

It is also possible to fall into the trap of false breakouts like most beginners: it is simply that the momentum dissipates immediately and the price returns to its natural direction after the breakout, which exceeds the number of real breakouts in the Forex market.

10. Retracement Trading

Retracement is a term that refers to the temporary change in price movement before it returns to its natural direction. It is the main element in this strategy of forex trading.

Retracement is very different from reversal. Reversal, unlike retracement, indicates the end of the current trend and the beginning of a new trend. It has a significant impact on the price, unlike retracement.

The distinction between these two is the core of this strategy, as it is what will make you take the appropriate action. They can be distinguished using some forms of technical analysis, such as Fibonacci retracements and others.

In this strategy, traders take some actions to take advantage of the retracement or reversal, whether by ignoring, exiting quickly, or trading in the opposite direction.

Of course, the danger of this type of trading appears in the mischaracterization of the market as being in a retracement for a short period or a reversal that changes the direction of the price completely.

It is very difficult to distinguish between them, especially in the early stages, so it is not recommended for beginners, but it remains a profitable and worthwhile strategy to try.

11. Carry Trading

Carry trading, or interest rate trading, is a type of trading that relies on selling a currency with a low interest rate and buying another currency with a high interest rate, and taking advantage of this difference in interest rates to achieve profits.

For example:

If the interest rate in France is 5% and in the United States is 1%, then using the US dollar to buy the euro, you will have received 4% as the difference between these two prices, and by adding leverage, you can increase that percentage several times.

But besides those very high profits, it is one of the most difficult and risky strategies, as any change in the exchange rate affects the amount of your profits, and leverage increases the amount of losses significantly.

If you want to use carry trading, make sure you are up-to-date with interest rate systems and all the news that you find on them.

It is not necessary to be your primary strategy, but rather a subsidiary method alongside more secure methods, and this is what we recommend.

12. Price Action Trading

One of the simplest forex trading strategies compared to all that have been mentioned before, as you will not have to take into account any factor in the market except price movement, as its name suggests.

Price action traders believe that all you need to know to trade is the price only, which they follow on a very simple chart that contains only the price and time variables.

Reading this chart is very easy, as the price direction is either up, down, or moving in a sideways direction, which is more than enough to determine the stage the market is going through.

Even the important factors that affect the direction of the market that we talked about before, such as economic and political changes, are also reflected in the price in the end, so they can still benefit from them in one way or another.

By determining the market direction and its fixed patterns, traders make buying and selling decisions like the rest of the strategies.

How to Choose the Best Forex Trading Strategy

Due to the vastness of the Forex market and the abundance of options and confusion in it, there is almost no fixed strategy that you can give to everyone.

In addition to the difference in the data of this market, traders also differ greatly, whether in the currency pair used, its stability, the time of trading, or even the period during which the process continues.

And of course, you must try more than one strategy before settling on one, because you will not know the most efficient for you until you see their results.

However, there are still some data that you can use to know the best Forex trading strategy for you, and among the most prominent of these data are:

Currency pair: The currency pair varies greatly in its stability and the amount of risk you will bear while trading it.

The further you move away from the major pairs that include the dollar, the more exposed you will be to losses. Identifying the pair from the beginning will help you significantly narrow down the range of strategies you will use, and it will give you an idea of the trading times you will work in.

Risk size: You must take the risk size into account when choosing one of the appropriate Forex trading strategies, as some of them guarantee you high profits, but on the other hand, they can lead to significant losses.
Time frame: There are many methods used in trading, some of which last for a very short period of time and do not exceed one hour, and some of which last for much longer periods of time. According to your purpose of trading and the time you allocate to that process, you must determine the appropriate time frame.
Number of trades: This point is closely related to the previous point, as the more the number of transactions, the less the time of each of them, and vice versa. The number of transactions you will make daily definitely affects the type of strategy you will choose.
Transaction size: The size of the transaction is also of utmost importance in determining the strategy, so you must make the size of each transaction proportional to the possible risk size according to the strategy you have adopted.

Conclusion

Profiting from Forex is more complicated than you imagine, it is not like other ways of profit that you can follow a certain methodology and reach your goal in the end.

But it is more like a maze with many paths that can get you lost or lead you to the finish line, and those paths are represented in the different strategies that you use in trading.

In this article, we have gathered for you the most prominent and best Forex trading strategies and the most used ones to save you hours of research and comparison.

We hope you enjoyed the article, and if you have any questions, please post them in the comments below and we will get back to you as soon as possible.

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12 Forex Trading Strategies That Will Make You Money