Adjust the Forex Trading Strategy with Your Trading Style (Part I)
Forex Trading Strategy is a trading strategy used for traders in predicting price movements. The Forex Trading Strategy that you use should be in accordance with your trading style. This will have a positive impact on your trading success.
Trading is a major activity in the forex market, commodity or stock index.The term “trading” in the financial market means the act of selling and / or buying financial instruments for the purpose of obtaining profits.
Choosing a strategy that matches your trading style is very important. You can choose which type and strategy that suits your character, because one of the keys to success in trading is choosing a strategy that matches your character.
In general, there are three types of trading and several strategies related to the type of trading, namely:
– Day Trading
– Swing Trading
– Position Trading
“Day trading” and “swing trading” are short-term trading types, while “position trading” is longer. Each type has different goals and targets, so it must be adjusted to the character of each trader who uses it.
Traders who embrace day trading do sell or buy transactions in one trading day only, in the hope that they will be able to book profits on that day. “Day traders” always close their transactions on the same trading day when they open the transaction, either in profit or loss. The main objective of a day trader is to make profits as quickly as possible even though relatively small in one trading day.
“Scalping” is a transaction with a target and a very small risk limit (5-10 pips) but the transaction frequency is high, or with a large volume (lot).Scalpers immediately close transactions as soon as prices meet their targets and risks. This strategy is quite risky especially if prices move quickly against the direction of your transaction. You also have to have a lot of time and energy to monitor market movements without stopping.
Traders who use this strategy actually make transactions against the market direction. They take long positions precisely when the market is down and sell precisely when prices are rising. They assume that every move must have a correction and that is what they are trying to take advantage of.
Be careful, this strategy is very risky because it is against the main principle of trading, namely “follow the trend” . Moreover, traders who apply this strategy tend to be greedy, but they are indeed classified as “risk-takers” . However, it is not advisable to implement this strategy.
– Daily Pivot
This strategy is based on an analysis tool called a pivot point. A pivot trader will identify market movements and make transactions based on this pivot.
A trader who uses a pivot strategy usually transacts like a robot.
The following is the formula for calculating pivot points:
If you take a long position at a certain price and use the closest support as a stop-loss. Then you should use the closest resistance level as a profit target.
The downside of this strategy is that when market movements become extreme, your stop-loss levels can be touched. Therefore this strategy is more suitable to be applied in a market that is not too volatile.
This strategy is the “opposite” of the fading strategy described above. In this strategy, a trader will make transactions in the direction of market movements. He will take long positions if the price moves in an uptrend, on the contrary will take short positions if the market moves in a downtrend. This strategy is in accordance with the basic trading principles that have been mentioned earlier: “follow the trend”. This strategy is the safest in trading.
You can try to use several indicators such as moving averages to identify the direction of the trend. You can also use indicators such as RSI, MACD, stochastic, etc. to find the right moment in opening a buy or sell position.
In the next section, we will discuss other types of trading, namely “Swing Trading” and “Position Trading” . Keep following this blog.
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Next : Adjust the Forex Trading Strategy with Your Trading Style (Part II)