Top 3 Forex Trading Strategies In 2021
Strategy 1) Day Trading
Strategy 2) Position Trading
Strategy 3) Scalping
Today, professional traders utilise many different trading strategies. 9 out of 10 professional traders will follow some form of trading strategy that they will align their trades towards. It’s important in your trading career to learn the top trading strategies used by different traders and why they work well for them.
1: Day Trading
Day trading is the most widely used trading strategy/style. It is often considered to be a pseudonym for ‘active trading’ itself. Day trading is a short term trading style, but unlike scalping (below), you are typically only taking on one trade a day and closing your position when the day is over. Day traders like picking a side at the beginning of the day, acting on their bias, and then finishing the day with either a profit or a loss.
Day trading is suited for Forex traders that have enough time throughout the day to analyse, execute and monitor a trade. It will suit you if scalping is too fast, but position trading (below) is a bit slow for your taste.
Time Consuming: 40% | Risk: 50% | Difficulty: 60%
2: Position Trading
Position trading is considered to be the opposite of active trading. Position trading uses longer term charts with open positions ranging from several days up to several weeks and sometimes even longer depending on the trend. This trading strategy is used in combination with other methods to determine the trend of the current market direction.
Position trading is a trading strategy suited best for those whom are witty, patient to wait long enough with open positions and long-sighted in their views. Those traders who believe to have a real feel for the markets. Typically, position traders use fundamental analysis for their trades, but sometimes they need to refer to technical tools as well. Rather than trying to forecast specific price levels position traders try to determine the ‘trend’ of a price pair. Typically, they ‘jump’ on a trend after it has initially established itself, then, when the trend starts to break off, they will usually exit their position. Therefore in periods of high market volatility, this strategy is more difficult and its risks carried are much higher.
A key characteristic that defines position traders is that they have a sizable equity to trade with, ensuring their positions are not endangering their deposits which could lead to brokers automatically closing the traders position.
Time Consuming: 20% | Risk: 85% | Difficulty: 80%
Scalping is one of the quickest trading strategies used by ‘active’ traders. Scalping is the art of going in and out of the market as quickly as possible, exploiting the price gaps created by the respective spreads. Typically ‘scalpers’ will aim to profit from the small price movements in their trading positions and will attempt to hold their positions for a very short period, thus decreasing the associated risk.
Scalpers are known to trade manually, but also, are increasingly using automated strategies. Many retail scalpers are increasing turning towards the help of Expert Advisors (EAs) in order to automate their scalping strategies. The reason for this is the benefit of identifying scalping opportunities (at high speeds). Trading bots therefore have a natural advantage over human traders in this respect.
Time Consuming: 95% | Risk: 70% | Difficulty: 85%