Talking about forex trading also means talking about various information about trading strategies. However, in reality, not all strategies that are claimed to be "great" can really function.
In this article, I try to summarize at least three forex trading strategies commonly used by professional traders.
1.Trading When There Are Strong Fundamental Driving Factors
This method utilizes the market response when there is economic data release. The market will usually move more volatile if the numbers from certain economic data are announced to be better or worse than expected.
For example, if the data of US non-farm payrolls (NFP) released are better than expected, the USD will usually strengthen significantly at least in the first 20 minutes. Conversely, if the data turns out to be worse than expected, the USD will usually be sharply weakened. Thus, the counterpart or "currency pair" usually will move up or down sharply too.
If for example due to the data the USD strengthens, then pairs such as EUR / USD, GBP / USD, AUD / USD and NZD / USD will move down. Thus, to benefit from price movements after the release of NFP data, traders open short positions on these pairs.
Economic data most often used to implement this strategy are usually US NFP and Fed interest rate decisions.
2.Using "Round Numbers" as Reference Support / Resistance
Meant by "round number" here are price levels such as 1.50000, 1.0000, 0.50000, 100,000 and so on. Whereas those that are considered "not round" are prices as we usually see, such as 1.38775, 1.58837, 139,387 and so on.
"Round numbers" are also often referred to as "psychological levels" which are usually areas of key support or resistance.
For example, when you see a price moving above the psychological level area, then that level becomes a key support. You can open long positions with a stop loss reference in the area of the psychological level. Conversely, if the price breaks below that level, you can actually get a chance to open short positions.
3.Using Technical Indicator Combinations
This is often referred to as a trading system. Professional traders usually use several technical indicators at the same time with the intention that one indicator can cover the weaknesses of the other indicators so that the resulting signal is expected to be more confirmed.
For example, you can see the technical analysis use the Stochastic Oscillator, Commodity Channel Index (CCI), Moving Average and Fibonacci Retracement.
Moving Average (MA) is used to help strengthen bias. If the trend is clear (for example an uptrend or downtrend), the MA is more functioning as an area of dynamic support or resistance. But if the trend tends to be difficult to determine, then the MA can provide clues, about whether the intraday bias is bullish, bearish or neutral.
In addition, MA can also collaborate with Fibonacci Retracement to provide good information on entry areas. Actually, the reference area for the entry market can be determined from the Fibonacci Retracement only, but if it is reinforced by the MA, that is, when the Fibonacci Retracement reference area intersects with the MA area, then the area will be more valid for entry market.
While the stochastic and CCI function as "trigger" or "trigger", which gives a signal to open a position (buy or sell). When the price is already in the reference area, then you are just waiting for the buy or sell signal confirmation from stochastic and CCI, according to the intraday bias.
Fibonacci Retracement also serves as a reference to prepare anticipation if it turns out our analysis is wrong. A break of key support or resistance based on the Fibonacci retracement will change the intraday bias from bullish to bearish or vice versa. This should be a "warning" if you have already opened a buy or sell position.
The simplest trading strategy for beginners
To become a profitable forex trader, the strategy does not need to be complicated. Even beginners who are just learning can profit if the forex trading techniques used are simple and easy to understand. we will discuss simple trading strategies that are suitable for beginners
1.Crossing Moving Average
Moving Average (MA) is the most common trend indicator that is widely used by traders. From beginners to professionals, moving averages are always used to identify the direction of the trend. Basically, when the MA is below the price it confirms if the current price is in a bullish trend (rising). Conversely, when the MA moves above the price, it means the current trend is identified as bearish (down).
Forex trading techniques with MA usually rely on the moment of crossing (crossing) MA. When the MA crosses the price, the indicator line shifts position and indicates a change in trend direction. The image below shows how to apply forex trading techniques with an MA for beginners.
2. Overbought and Oversold
Overbought is a condition in which price increases have reached the maximum area, so prices will then fall. Conversely, oversold indicates the condition of prices that have dropped in the lowest area, so that the next price will rise again.
Overbought and oversold prices are not seen in movements on the chart. To see it, signal instructions are needed from oscillator indicators such as RSI, Stochastic, CCI, etc. Apart from being different in terms of appearance, each indicator has unequal overbought and oversold benchmarks.
RSI, for example, shows an overbought limit at level 70 and an oversold limit at 30. Stochastic has levels 80 and 20, while the CCI signals overbought price if the chart indicator crosses the +100, and oversold when the price drops -100.
With an understanding of overbought and oversold that usually brings reversal opportunities, it is not difficult for beginners to rely on both of these as a reliable forex trading technique. The chart below shows how to run a simple forex trading strategy with overbought and oversold generated from the RSI indicator.
3 Sideways Trading
Sideways is a situation where prices move stably and tend to be flat (not uphill as in a bullish trend or decreasing like when a bearish trend occurs). Movements like this happen quite often, but not many traders use them because they are considered less potential.
In fact, if a trader knows the techniques of forex trading in the sideways market, profits will be easily obtained. This strategy relies on support and resistance levels which are the lower and upper prices in a range.
Support resistance can be determined from many things, starting from the manual method by looking at price patterns, psychological levels, Fibonacci tools, or Pivot Point methods. Basically, when prices hit proven support, they will bounce up. When the price nears the resistance tested, the first anticipated possibility of such a move is the price bouncing down after failing to break the resistance line.
The figure below shows a simple forex trading technique with manual resistance from a price pattern.
In contrast to the sideways strategy, this forex trading technique is effective when the market is trending. A trendline is basically a vertical line that acts as support (when prices rise) or resistance (when the price trend decreases).
A breakout occurs when prices suddenly break through the trendline and change direction. If the trendline line is tested strong, then this breakout signal can be the beginning of a reversal (price reversal). On this chart, it is clear how open buy opportunities are created after the trendline line is broken by prices that turn stronger.
How do you choose the most suitable trading strategy for beginners?
Of the 4 choices of trading strategies for the simplest beginner above, there is no right or wrong, let alone one that is profitable or detrimental. All techniques can bring results as long as they are used correctly. Therefore, choose the strategy that you understand the most and then test the compatibility in the demo account. Learning forex is indeed difficult, but being pursued can produce unexpected benefits.
Whatever your choice of forex trading strategy will be, don't ignore these 4 important things:
Always pay attention to the fundamental issues that are happening. Even though you rely on technical analysis, price movements are driven by buying and selling sentiments which are often influenced by fundamentals.
Use the price action method to confirm the indicator signal. Price action is a price pattern formed on the chart. A small or short length of a candlestick is a reflection of the behavior of buyers and sellers. So actually, you can recognize important patterns in the price action to confirm the reversal or forward signal from the indicator.
Always apply risk management to anticipate losses. No matter how much forex trading techniques you use, there is always a chance of loss to be borne. So you should anticipate these losses by minimizing loss through risk management rules.
Try to discipline applying forex trading techniques or also commonly called Trading Trading Discipline ‘. Without consistency, trading strategies will not work optimally, and you will more easily fall into the mistakes of beginners who still like to leave their trading techniques to speculate.
In order to optimize your forex trading, you should look for strategies that are truly suitable for you. In accordance with your character, according to the strength of your capital. Don't try to force yourself to use other people's trading strategies that don't suit you. Although for example, this strategy can work well when used by that person, it may not necessarily work for you, because it is not necessarily suitable.