Here are some of the most common types of Forex strategies;
This is an approach that takes a more long term view of things. It sees traders staying in positions for weeks and sometimes months. The main form of analysis used in this strategy will be fundamental analysis. Sometimes technical analysis can be handy for when you are trying to be more accurate with your entry timings.
- Not as much time needs to be spent with this strategy as you are taken longer term positions
- You do not need to stress out about fluctuations of prices in the short run
- A strong risk/reward for your trades
- You need to be well versed in the application of fundamental analysis
- Large capital requirements are usually needed because of the wider stop loss
- Lower quantity of trades may mean not as much profits.
This is the shortest term strategy you will be dealing with when it comes to Forex. Positions will only be held for hours or even minutes. Typically, the positions will be held for between 5 and 15 minutes.
You will be looking to take advantage of the intraday volatility. Therefore, you want to deal with the more volatile instruments on the given day. You will be trading on the breakouts and pullbacks, as well as buying the support and selling the resistance.
You will not really be taking into account fundamental analysis and the long term is not really of any relevance in the very short term.
- For successful day traders, they can be in the green more times than not
- No risk of prices changing no you overnight as you only hold the positions for minutes or hours
- Very stressful as you are always looking at the markets
- You can be the victim of significant slippage
- Large opportunity cost as you could be doing other types of work
This is a strategy that focuses more on the medium term. A trade can be held for days or weeks. Your aim is to partake in a single change in the market, aka a swing. Therefore, you will be looking at the lives of moving averages, candlestick patterns and resistance and support to guide your trading.
- You can do this part time
- You have plenty of trading opportunities
- You will not be getting involved with big trends over time
- There is overnight risk
This is not really a viable option for retail traders as a lot of the profits will be taken up from the transaction costs. There are also complex algorithms automatically looking at the Forex market for scalping opportunities and you are not going to be faster than these algorithms.
It is a very short term approach where you often hold trades for just seconds. You are looking to eke out tiny gains in given trades depending on order flow.
- Constant opportunities to make trades
- Small gains can add up over time
- Takes a lot of cost to have the best equipment and software
- You will have to be trading constantly throughout the day
- Very stressful