Forex trading is not a thing for every person. It requires a trader with greater knowledge, quick decision-making, and capability to tolerate loss in their first few trading attempts. If you feel that you have all these characteristics, you can initiate your first trading. However, first, choose a method of trading that is best for you.
We have mentioned some trading strategies of 2020 that you can use to succeed in the forex market.
Best Forex Trading Strategies Of 2020
Plenty of trading strategies are common in the market. However, not every strategy is suitable for everyone. Some of these methods involve greater risk with higher money; others have less risk with a lower chance of making money. So, it’s important to understand which strategy will work for you and which one you can easily manage.
Pick the one that is best for you, considering your personality type, available time, and risk tolerance. So, read more to choose the best trading method for you.
Scalping
This one is a short-term strategy and helps you achieve multiple small profits from trading positions at a specific time. Not to mention, scalpers need fast actions as they enter and exit trades only in minutes and even in seconds. It is a stressful way of forex trading and needs quick decisions, so it is not great for every type of trader.
Scalpers also need to closely monitor price charts to analyze patterns that can help them understand upcoming exchange rate movements.
As a scalper, you need to make quick moves as well as monitor price charts; they use a very short-term tick chart for analysis. This trading method is more impactful when you use a broker with quick guaranteed order executions, tight spreads, and minimal or zero-order slippage.
Day Trading
This is another great short-term trading method. However, this strategy is mostly used in a particular trading session. Usually, a person following day trading will not take overnight positions and close out all their trades every day. This trading strategy helps eliminate your exposure to market movements when you are not focusing on the market.
Day traders are mostly inclined towards the trading plans that depend on the deep analysis of short-term charts. These charts show the intraday price action. Traders activate when the exchange rates increase more than a certain level on the chart for a currency pair and get confirmed when the exchange rates have an increase in volume.
Momentum or Swing Trading
Swing trading, also commonly called momentum trading, is slightly different from the ones mentioned above and involves medium-term plans that help you cover more market moves. Furthermore, this trading involves trading with major trends as well as against them when the Forex market is correcting. In this case, traders usually hold overnight positions.
Also, these traders focus on both entering and current position. It depends on the momentum indicators that give you buy and sell signals. This helps traders to figure out oversold or overbought markets they can buy or sell. They can also sell before resistance levels or buy ahead of support that appears on the exchange rate charts for any currency pair. Always, think wisely when selecting the broker that best suits your trading needs.
The relative strength index (RSI) and the Moving Average Convergence Divergence (MACD) are the most common momentum indicators.
50-Pips a Day
This is one of the latest trading strategies of 2020. In this strategy, traders use leverage for making the early market move for some highly liquid currency pairs.
The EURUSD and GBPUSD currency pairs are one of the best currencies you can use in trading through this method. Moreover, you need to place two opposite or two positions pending orders after the 7 am GMT candlestick closes. So, when you catch one of them triggered by price movements, the other automatically gets canceled.
Not to mention, you also need to set profit at 50 pips, and the stop-loss order is at any point between 5 and 10 pips below or above the 7 am GMT candlestick when formed. A trader needs to follow this plan to avoid risk.
Once you have implemented these conditions, it becomes dependent on the market for everything. You also need to understand that scalping and day trading are short-term trading methods, but short-term strategies have a higher risk than others because you need to take more trades. So, it becomes crucial for you to have an effective risk management plan.
Bottom Line
Now that you have learned some common strategies, you can easily make your first move in the forex market. Don’t forget to consider all the aspects of forex trading mentioned above so that you have lower exposure to risk.