By Fabiano Trevisiol
What is a forex strategy?
A forex strategy is a set of rules that will allow you to trade successfully.
Why forex strategy?
When you decide to trade, you can’t operate at random. In this way you will lose all your money in no time. You need a strategy, a plan, a method, so that in most of potential cases you are planned and organized, so you will have no surprises and whatever happens, you’ll be ready specially emotionally.
What should contain a forex trading strategy?
A forex strategy should contain the set of rules to work, for managing your money and the size of the positions, to choose when and how to enter in the market, what are the operational signal? How will handle my money management? To all these questions should be given a reply, and before sitting down in front of charts you should give it a read. What types of forex strategies are there? There are innumerable, more complicated, more easier, more profitable, more or less constant.
Let’s see some of them:
- Price action
- Use of cycles
- Using the intersection of moving averages
- Scalping of very short-term
- Swing trading
- Inverse divergence
This technique has taken much foot lately, the base is the simple technical analysis that harks back to Dow theory. With the price action charts are analyzed by identifying support and resistance, looking for the formation of certain forms of candles to enter the market.
The cycles are repeated market trends occurring several times over a period of time. With the cycles trying to determine when a bullish or bearish period is about to start or terminate based primarily at the time factor.
This technique uses to identify support and resistance, and provides the entrance to the market to breach thereof.
Intersection of moving averages
Usually used on very high time frame, this method provides the entrance to the market when the moving averages intersect, is by far the easiest method of trading, but has the bad luck to get good signals you need to work with time frame settings and moving averages that have few signals per year, from 4 to 8.
For the scalping of short-term you are using very small time frame, 5 minutes or 1 minute, you enter the market when the momentum indicator exceeds a certain threshold, or form of the maximum/minimum breakage of candles. Usually the profit-taking is few pips or even 1 pip.
This technique always uses the fundamentals of technical analysis to locate the entrances to maximum or minimum on market of normal market fluctuations.
The method of inverse divergence using the stochastic indicator, is an entrance to the market when the indicator signals a direction opposite than that of candles on the chart, it means there is an offset that statistically, sooner or later you will then resorb draws advantage from this concept.