3 Forex Strategies Used by Professional Traders
Talking about forex trading also means talking about various information about trading strategies that you can get on the internet.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 strategies commonly used by professional traders.
- Trading When There Are Strong Fundamental Driving FactorsThis method utilizes market response when there are economic data releases. The market will usually move more volatile if the figures from a particular economic data are announced better or worse than expected.
For example, if the US non-farm payrolls (NFP) data is released better than expected, the USD will usually strengthen significantly in the first 20 minutes. Conversely, if the data turns out to be worse than expected, the USD will usually weaken sharply. Thus, the counterpart or “currency pair” will usually move up or down sharply as well.
If for example due to the data USD strengthened, 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 the pair.
The most common economic data used to implement this strategy is US NFP and Fed interest rates.
- Using “Round Numbers” as a Support / Resistance ReferenceWhat is meant by “round numbers” here are price levels such as 1.50000, 1.0000, 0.50000, 100,000 and so on. While those considered “non-round” are prices as we usually see, such as 1,38775, 1,58837, 139,387 and so on.
This ” round number” is also often referred to as a “psychological level” which is usually a key support or resistance area.
For example, when you see prices move above the psychological level area, then that level becomes the key support. You can open a buy position with a stop loss reference in the psychological level area. Conversely, if the price breaks below that level, you can actually get a chance to open short positions.
- Use a combination of forex technical indicatorsThis is often referred to as a trading system . Professional traders usually use several technical indicators at once 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 technical analysis applied by the Market Analyst team FOREXimf.com. There we 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), then the MA functions more as a dynamic support or resistance area. But if the trend tends to be difficult to determine, then the MA can give a hint, whether the intraday bias is bullish, bearish, or neutral.
Besides that, MA can also collaborate with Fibonacci Retracement to provide good entry area information. Actually, the reference area for the entry market can be determined from the Fibonacci retracement only, but if it is strengthened by the MA, that is when the reference area of the Fibonacci Retracement intersects with the MA area, then that area will be more valid to enter the market.
Meanwhile stochastic and CCI function as “trigger” or “trigger”, which gives a signal to open a position (buy or sell). When the price is in the reference area, then you just have to wait for the signal confirmation to buy or sell from the stochastic and CCI, in accordance with the intraday bias.
Fibonacci retracement also serves as a reference to prepare anticipation if it turns out our analysis is wrong. A break of the key support or resistance based on the Fibonacci retracement will turn 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.
In order to optimize your forex trading , you should look for strategies that really suit you. In accordance with your character, according to your capital strength. Don’t try to force yourself to use other people’s trading strategies that don’t suit you. Although for example the strategy can work well when it is used by the person, it is not necessarily successful for you, because it is not necessarily suitable.