Forex trading strategies.
James is a lead editor for Invezz, where he covers topics from across the financial world, from the stock… read more.
Updated: Aug 24, 2022.
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15 Lessons.
1 hour 44 mins.
Very few people are available to trade forex full time. Traders often make their trades at work, lunch, or late at night. The problem with this type of trading is that with such a fluid market, trading sporadically for a small part of the day creates frequent missed opportunities to buy or sell. This could mean a complete loss of funds if a position does not exist before the market moves against you or a lost opportunity to buy at a desirable price. These missed opportunities can spell disaster for the part-time trader.
However, there are strategies that can work based on a part-time schedule. For example, night traders may be limited to the types of currencies they trade based on volumes during the 24-hour cycle. These night traders must employ a trading strategy for specific currency pairs that are most active during night hours. An example would be trading the Australian dollar (AUD)/Japanese yen (JPY) pair or something less well known as the New Zealand dollar (NZD)/JPY or AUD pair. It is extremely useful to look at the correlation between the two currencies when choosing a pair, so having a block of time during the day to study the market and implement trades can lead to a successful strategy. (Learn how to set each stop and limit type when trading currencies. See How to Place Orders with a Forex Broker.)
The main problem comes from true part-time traders who can come and go during the day. These traders are time constrained and may only be available to trade for an hour or two per day or even per week. Here are some strategies for part-time trading when you have an inconsistent schedule.
Know your markets.
Assuming you work from nine to five in the United States, you can trade before or after work. The best strategy for trading any time block is to choose the most active currency pairs during that time. Knowing when the major Forex markets are open will help in choosing the major pairs.
New York is open from 8:00 am to 5:00 pm EST Tokyo aber from 7:00 pm to 4:00 am EST Sydney aber from 5:00 pm to 2:00 am EST London aber from 3:00 am to 12:00 noon EST.
During the 12:00-2:00am time, the markets in Japan and Europe (open from 2:00am to 11:00am) are in full swing, so part-time traders can pick the major currency pairs. Forex like EUR/JPY or EUR/CHF for major currencies or look for other pairs involving the Hong Kong Dollar (HKD) or Singapore Dollar (SGD) for example. During the 5 pm to midnight time frame, trading the AUD/JPY pair is an available option for this time frame. Regardless of which pairs the part-time trader chooses, before placing any bets, the trader must understand the market by studying the technicals of these pairs, as well as the fundamentals of each currency.
Stop-Loss Orders.
Assuming you can only trade for a minimum amount during the day, say an hour, the best strategy may be to let your computer be your “trading partner”. Because the Forex market is so fluid, not having the flexibility to watch the market can leave you with a lot of missed opportunities, so employing a trading program where you can let information technology work for you could be the way to go. best forex trading strategy Another common strategy is to include setting stop-loss orders so that if the market makes a sudden move against your position, your money is protected.
price action.
Assuming you pop in and out while you work (10 minutes at a time), one strategy that can be used during these brief but frequent trading periods may be the use of price action trading. Price action trading can be described as analyzing the technical data or charts of the currency pair and trading based on what the chart tells you. In its most basic definition, traders can look at up bars, which is a bar that has a higher or lower bar than the previous bar, and look at down bars, which is a bar with a higher or lower low than the previous bar. the previous one. Up bars indicate an uptrend while down bars indicate a downtrend . Other price action indicators may be inside or outside the bars. Choosing the chart time frame that best suits your schedule availability is the key to success with this strategy. (Learn how to bank short-term profits by placing stops away from the crowd. See Stopping the Hunt with the Big Forex Players.)
During the 12:00-2:00am time, the markets in Japan and Europe (open from 2:00am to 11:00am) are in full swing, so part-time traders can pick the major currency pairs. currencies, such as EUR/JPY times EUR/CHF for major currencies or for other pairs involving the Hong Kong dollar (HKD) or Singapore dollar (SGD), for example. During the 5 pm to midnight time frame, trading the AUD/JPY pair is an available option for this time frame. Even though the pairs they choose part time, before considering, the trader must understand the market by studying the technicals of their pairs as well as the fundamentals of each currency.
Price Action.
Assuming you show up and sell while you work (10 minutes at a time), one strategy that can be used during these trading periods but can be the use of price action trading. Price action trading can be described as analyzing the technical data or figures of currencies and trading based on what the chart tells you. In its most basic definition, workers can analyze rising bars, which is a bar that has a bar higher or lower than the previous bar, looking down bars, which is a bar with a higher or lower low lower than the previous one. Up bars indicate an uptrend while down bars indicate a downtrend. Other price action indicators may be inside or outside the bars. Choosing the chart time frame that best suits your schedule availability is the key to success with this strategy. (Learn how to bank short-term profits by placing kills from the crowd. See Stopping the Hunt with the Big Forex Players.)
How long to trust a trading strategy?
A few days ago we bought GBP/CHF taking advantage of the fact that the price had reached the key support zone of 1.4780 and that the week ended with a bullish engulfing daily candle (in red ellipse) that denoted a resumption of the original trend. It was a good time to buy and just wait. However, on Sunday the markets started down making large jumps (Gap’s) of up to 100 points in several pairs as a result of the Spanish banking intervention. As you can see, our position hit the stop, it was closed (real account attached) and paradoxically the price on Monday made a giant candle that covered everything in its path, doing exactly what we had planned. Bad luck? An exogenous event (which is never lacking) took us out of the market and it is a good point to ask ourselves: Isn’t the strategy the wrong one? Should we change the system? Or how many times should we lose to discard a strategy and not spend time on obsolete systems?
These answers have two edges. In the first place, a soccer “coach” does not send his “star” to the bench if he has had a bad game. You measure the players by seasons, not by a single game. Secondly, the “coach” trusts his player because he knows him completely. He knows his strengths, his performance, his potential and his limitations (because there is no perfect player). The strategist knows when it is best to use his “star”, understands when to protect him and relies on his historical performances to keep him in his squad. Take this simple analogy to trading and ask yourself: Do you really know the performance of the strategy you use? Can you speak strongly about your system based on statistical support? If a Forex strategy does not have mathematical backing then it should not be called that. Something very important, don’t you think? For a trader to “believe in a system” you must take the effort to measure it seriously (and not be told about it), otherwise they will never have faith in it and therefore their trading will be inconsistent and governed by uncertainty. Do not operate to operate, trading is a matter of discipline and criteria. Only then will they understand how financial markets work.