Hearing the phrase “forex trading strategies” immediately arouses techniques employed in trading. Some people can interpret this as the procedural aspect of trading but really, it’s not. Trading strategies are a collection of ideas that a trader can resort to in order to optimize the benefits of favorable market conditions into profit.
Some people even wonder if there is such thing as a “best strategy”. Unfortunately, there is none. Using the different strategies you will read about entirely depends on how market conditions are interpreted. In this case, the specific strategy a trader employs in response to these conditions is accepted as the best. So let us take a look at the general classifications of these strategies.
Basic Strategies. Under this type alone, there are more or less 17 forex trading strategies that traders can use. All of these are especially helpful to beginning traders because the approach is simple: collectively, these set of strategies point towards accurate identification of chart patterns, and at least one or two indicators.
Typical in learning, knowing what the basics are helps in an effective transition towards the more complex concepts of trading. A few examples of strategies that fall under this category are as follows: Stochastic High-Low, Trend Line Simple Trading, Fast and Slow Moving Averages Crossovers, and RSI High-Low.
Simple Strategies. Under this type, there are over 51 forex trading strategies. These strategies are employed to further one’s basic knowledge and to enhance a trader’s research capability to come up with his own trading style and systems. Some of the strategies that fall under this type are Tedosi’s Simple System, Parabolic SAR and ADX, Raphael’s Simple Strategy, and RSI and Regression Line.
Complex Strategies. This category involves three or more technical indicators in analysis. Some rules are observed across the 22 forex trading strategies under this category, which includes Fibonacci Trading, Monzer Forex System, Fibonacci and Trend Line Confluence, Divergence Trading, Dynamic Gains. This category of trading strategies is useful in developing new trading styles.
Before you move on to study the different forex trading strategies, it is beneficial to set your expectations right in terms of the following:
- No strategy is immune from losses: Even the best traders experience loss in a certain point of their trading life.
- All trading transactions involve risk: You will never know if you entered just in time or have left at the right time.
- Values in trading are a must: For you to become an effective trader, you can follow the principles involved in trading strategies or not follow it at all, as long as you are disciplined. Knowing your limitations is important.
- The strategies are not rules: Rules are subjective in trading, and it is entirely up to the trader to see the benefits of disadvantages of a trading situation.
Above all, keep in mind that no strategy is perfect and no technique is best. The variety of market indicators should tell you that what has worked yesterday can or cannot work today. This is the main reason why various trading strategies exist: to make you resilient to change.