A trading strategy is a process of trading used by a forex trader to decide when to buy or sell a currency pair at any given time, in the hope of making a profit.
A good strategy tells you when to execute your trades based on your established, tried and tested method. There are numerous forex strategies that you can use, including fundamental analysis and technical analysis.
By trading objectively following your chosen trading strategy and with sound risk management techniques, you can trade confidently over the long-term.
Fixed rules which determine entry and exit points can help you take the emotion completely out of trading. This is key to potentially making more consistent gains and becoming a more profitable trader.
The most important key components to a successful FX trading strategy are:
A robust plan for all market conditions allows you to be consistent in monitoring and improving your results going forward.
You are confident and comfortable with your rules and do not overreact to sudden market moves.
A fixed strategy means you manage your risk effectively on every trade, using a stop loss. You respect certainty over risky trading behaviour.
Opening a demo account allows you to practice your strategies in real market conditions. You do not risk your own money and it’s a great way to apply your strategy to real world price action. Learn more about FXTM demo accounts here.
This short-term strategy means you don’t hold any position overnight – you enter and exit all orders within the trading day. This normally means you trade a large number of positions for small profits.
This type of day trading is more intense and involves even shorter timeframes, where you hold a trade for a few seconds or minutes at most. You exit your position as the market moves in your favour.
Position trading is a longer-term trading strategy, usually involving fundamental analysis to forecast trade ideas. Short-term market fluctuations are less important, and you will probably have only a small number of trades open, but with a higher value.
This strategy involves technical analysis to take advantage of short to medium-term market movements. Like both day and position trading, you look to identify intermediate trends in the market.
A trading strategy often reflects the personality of a trader. So, it is important to try and find a style and strategy that suits you.
You can test out your strategies by simulating forex trading – both manual and automated – on our demo account.
Take your forex trading to the next level. Discover more about forex trading strategies at https://www.forextime.com/education/forex-trading-strategies.
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