10 Forex Trading Strategies Every Trader Should Know

It does make all the difference if you know some general strategies first, especially if you are a forex newbie or interested in diversifying your approach. So, below is a short summary of 10 common strategies in forex trading, made simple for a beginner like you:

1. Trend Trading
Trend following is a strategy that identifies in which way the market is moving. Traders attempt to determine which way the market is running-higher, called a “bullish” market, or lower, called a “bearish” market. The goal is to “ride the wave” as long as it keeps going. This is most successful in markets with clear, long-term direction.

Key Point: “The trend is your friend.” Look for long-term price movement and trade in that direction.

2.Range trading
Range trading occurs when you find a currency pair that has its fluctuation between a high price, or resistance, and the low price, or support. These are looked at by traders as an appropriate time to buy when the price goes to the low support level and sell at the upper resistance level. This has the highest success in nontrending markets, that is, markets that do not trend too long in one direction.

Focus Point: A stable market that can have a somewhat predictable range of prices.

3. News Trading
News trading involves major economic events and news releases that influence the forex market, such as GDP reports, interest rate decisions, and employment data. Market participants will tend to go long or short beforehand, during, or after these events according to changes in the price.
Key Point: Be informed about global financial news and respond swiftly on major announcements.

4. Retracement Trading
Retracement trading is a concept that encompasses a temporary reversal of a greater trend. Here, a trader waits for the price to pull back or “retrace” from its overall direction before jumping in the same direction again. Most traders use tools, such as Fibonacci retracement, to find key levels at which the price might reverse.

Important Takeaway: Recognize areas of pullback in the trend and enter at a better price before the trend resumes.

5. Grid Trading
Grid trading: In this technique, the investor places buy and sell orders at certain price levels above and below a base price. This technique does not require any sort of previous imagination about the direction in which the market is moving but captures the profit on the fluctuations in the prices.

Key Point : The investor keeps placing multiple orders at predefined price intervals to grab both upside and downside movements in prices.

6. Carry Trading
Carry trading is borrowing money in a currency with low interest and investing it in a currency with high interest level. The difference in interest rates can be used to draw profit. But it is effective for a longer period of time.

Concept: Invest and make a profit through the differential interest rate of two currencies.

7. Day Trading
Day trading: open and close all positions in the same day. Day trading is more of a short-term idea that enters small price movements within the day. Day traders usually do not open overnight because it is quite risky.
Important Idea: Day traders are making numerous trades quickly within the day; they do not take overnight risk.

8. Breakout Trading
Breakout trading exploits large price movement once it “breaks out” of a key level of support or resistance. Once through, the trader expects it to run in that direction, and then the ball is in their court to make some money.

Key Point: Look for times when price surges past key levels and stays on its newfound momentum.

9. Swing Trading
Swing trading is a medium-term strategy that allows the trader to hold the position for a few days or even weeks in search of those swings in the market. It’s great for people who cannot keep tabs on their trades through the day but still want to catch more significant movements.

Key Point: Hold for some days or even for some weeks to be able to profit in case of significant market swings.

10. Scalping
Scalping is quite dynamic: it entails placing small trade positions within a given spot that mounts up into thousands of trades within one trading session; and usually, through rapid and fast entry and exit of the markets. Scalpers enter and exit orders for a position in minutes or even seconds.

Key Point: Making frequent small trades throughout the day to capture small price changes.