There are limitless profits to be made from the huge forex market and that’s the truth. However, to access these profits you need to have a working, winning strategy.
You need to adopt a business mindset rather than a gambler’s mindset to reap the rewards of currency exchange.
Some of the most profitable forex trading strategies are also the simplest and can be used even by beginners.
1. Trend Trading
This is one of the most popular trading strategies favored by expert traders. It is a strategy based on the knowledge that most currencies stay for a long time within a certain narrow price range.
This range will in time be broken by a powerful and long-term price movement and this presents the best time to make a killing.
Once the trader identifies the trend, he/she places a buy order above the top of the price range or below the bottom of the price range.
To be successful as a trend trader, you need to recognize when to place a sell order. This is just before a price reversal occurs.
A common weakness of most traders who attempt trend trading is to exit the trade early which results in missed opportunities for higher profits.
An opposite reaction that is also common is holding onto positions too long resulting in a loss of already gained profits once the price reversal begins.
2. Range Trading
As mentioned before, currency prices tend to restrict their movement between narrow ranges. The prices move in alternating cycles from the bottom to the top then top to bottom.
This forms support and resistance levels and by monitoring these range, a trader can know when the prices are likely to go up and when they are likely to move down.
To profit through forex range trading, a trader buys at the bottom price and sells at the top price.
One thing about this kind of trading is that when a range continues for a prolonged period it is likely to face an imminent breakout so the trader needs to be careful when placing buy and sell orders.
3. Breakout Trading
Forex prices are very volatile, especially for the currency majors. The prices experience breakouts almost every few seconds, minutes, hours, daily, etc.
A forex breakout trader watches the price action and anticipates decent breaks to make fast and high gains.
For better success as a breakout forex trader, you need to identify the best times for breakouts.
These are usually periods of high price volatility such as the times when two market sessions overlap.
4. Scalping Strategy
This must be the ultimate in a day trader’s dream strategy. However, it is filled with dangerous pitfalls and some forex brokers do not even allow it as an option on their trading platforms.
Employing a scalping strategy involves making many trades every day to take advantage of small pip movements.
The profits really add up in time though it is not a recommended strategy for forex beginners.
Photo credit: Lindacochran
