Trading in Forex is not easy, and unless you have a solid understanding of the strategy that you are applying to back your investments, the risks are just too great. However, given the number of strategies there are, it can be quite confusing to find one that works for you. While new traders can only figure out the perfect strategy for themselves after they have tried out a few of them, we have made that job easier and faster for you by narrowing it down to just five.
Position trading is dependent primarily on fundamental analysis for developing a bias, and technical analysis for timing the entries. Keep in mind that this is a long-term strategy that involves holding onto your trades for a minimum of weeks and sometimes, even months at a stretch. As with every strategy, there are both advantages and disadvantages to position trading, some of which can be summed up as the following:
- Long-term nature of the strategy means it doesn’t require investing too much time
- Short-term fluctuations don’t affect it too much
- A lower risk factor, as compared to short-term strategies
- Due to the wide stop loss, a decently large capital base is essential
- Fewer trades equal lower chances of making a profit
- The trader/broker needs to be an expert at fundamental analysis
Purely reliant on technical analysis, swing trading is too quick a strategy for big institutions and their big investments. Neither a long-term, nor a short-term strategy, swing trading generally involves trading on the one-hour or the four-hour timeframes.
Some of the pros and cons of the strategy can be described as follows:
- It will require your time and attention, but won’t take too much of it
- Chances of being profitable are much higher due to the higher frequency of the trades
- The overnight nature of the strategy involves associated risks
- Cannot be used to capitalise on big trends
Not to be confused with very similar strategies like copy trading or social trading, mirror trading is actually one of the best strategies for forex traders in 2019. The strategy involves connecting one’s account to one or more algorithmic trading strategies available on the server, so that all trades are completed automatically. To understand how it works and how you can connect your trading account to some of the most successful forex trading algorithms in practice, visit this page on Investingoal.com and learn in detail about the concepts of mirror trading. What makes mirror trading different and more effective than copy trading is the fact that a tested and proven algorithm is followed here, unlike in copy trading, where the current actions of a trader are simply copied and reflected on all the connected accounts.
Day trading is one of the most common forms of trading and it is quite similar to swing trading. The main difference between the two primarily lies in the timeframe, as day trading is a true short-term strategy, while swing trading can be described as a mid-term strategy. The trades are held for as little as 5 to 15 minutes to a maximum of twenty-four hours in day trading. The primary objective of the strategy is to make profits from the tiny rises and falls in value that happen in minutes or hours every day of the year. Check out some of the key advantages and disadvantages of day trading below:
- The profits can be consistent and constant in nature, provided the trader/broker knows the game well enough
- Non-existent overnight risk
- Keeping an eye on the market is pretty much a full-time job
- Big slippages can make you lose a lot of money
Scalping is by far the fastest forex trading strategy in practice. The trader holds on to the trades for as little as seconds while he/she tries to take advantage of every little change in the concerned market. The success of a scalping strategy is primarily dependent on how well you are able to use the order flow tool. However, scalping is not without its share of flaws which makes it unsuitable for a lot of people. Find some of the key aspects to both its advantages and disadvantages below:
- Numerous trades everyday mean good profit for experts
- In spite of being a full-time job, the profits might be worth it
- Stressful and time-consuming as you need to keep an eye on the market every single minute or even second
- The necessary tools and software are not cheap or entirely reliable
Now that you have a short list to work with, it is recommended that you decide on the strategy based on the number of hours you have available to invest in forex trading. Long-term strategies are more suitable for people with full-time jobs, while mid- to short-term strategies are perfect for those looking to turn forex trading into a full-time profession. However, something like a well-chosen mirror trading strategy could actually work towards getting you the best of both worlds. You won’t need to spend as many hours in front of the screen, but you won’t have to give up on the hopes of getting a good return from your investments either.