Common trading strategies
Although each person’s strategy should be unique, there are a few that traders commonly gravitate to. These can be tailored to fit your specific skills, goals and risk appetite. No one strategy is superior to another. It all depends on how you want to trade. It is also worth remembering that, no matter the strategy you choose, forex trading involves significant risk, meaning it isn’t a suitable investment method for everyone.
Day trading
Day trading involves opening and closing positions during a single trading day, to profit from small price movements. Day traders never keep their trades open overnight.
Day traders need to have a lot of time at their disposal, to monitor the markets and identify the best moments to strike. As such, it may not be a suitable strategy if you only have a few hours a day to dedicate to trading. Also, if you’re looking to focus on long-term investments, you may want to keep reading.
Position trading
Position traders ignore short-term trends, focusing instead on how an asset performs over the long-term. Trades can be kept open for weeks, months and sometimes even years!
Patience is key when it comes to position trading, as is a good understanding of the fundamentals that underpin long-term trends. It’s not for the faint of heart and requires discipline.
Swing trading
Swing trading is a medium-term strategy that falls between day and position trading. Swing traders try to profit from the volatility that often occurs between the end of one trend and the start of another.
It requires patience and the careful use of technical indicators to monitor the market and identify the best time to enter. Swing trading is a good option for those that can’t be glued to the charts but have a couple of hours to spare during the day. So, if you work full-time but can keep up to date with the latest market news, then swing trading may be for you.
Scalping
Scalping is the pinnacle of short-term strategies, with trades lasting a matter of minutes or even seconds. A scalper’s goal is to make small profits from minor market movements. Due to this, scalpers often place tens or even hundreds of trades per day.
As a scalper, things can get intense, so you need to have nerves of steel and laser-focused concentration. The best time to trade is during high liquidity and when the market is trending strongly. This allows you to open and close multiple trades in the direction of the prevailing trend. This strategy is arguably the most time-intensive, making it less suitable for traders that have fewer hours to spare.