There are two main strategies that we know in forex trading. That is, the trend trading strategy and range trading. Both have significant differences in both treatment and outcomes. You can choose either a strategy or both but we suggest specifying that strategy before you position entry in the market.
Trend trading or range trading are two different strategies that require almost opposite mindsets and money management techniques. Fortunately, the forex market is uniquely able to accommodate both trading strategies, giving traders the trend and trader range with profit opportunities.
The simplest trend direction identifiers are the higher lows in the uptrend and the lower highs in the downtrend. Whatever strategy you want to use, identify first up or down trends (sideways).
Entry market at the beginning of the trend
One of the goals of the trading trend is to be able to enter the market early and hold the position until there is a trend reversal. Mindset trader trends that must be inculcated is “I’m right or I exit?”
If the price moves in the direction of the trader’s position then the trend trader will hold the position until the end of the trend. But if it does not match the direction of entry position, it must be liquidated. Therefore, trend traders usually have tight stops.
Usually, more trading trends result in a losing position than a favorable position and require strict risk control. The rule of thumb is that trend traders should never risk more than 1.5-2.5% of their capital in certain trades.
If you have $ 10,000, that means placing stops about 15-25 pips from the entry price. Obviously, to practice such a method, the trader must be convinced that the traded market is highly liquid.
Of course the forex market is the most liquid market in the world. With an average daily turnover of US $ 1.6 trillion, the currency market is able to surpass and shrink the size of stocks and bond markets. Moreover, the forex market is traded 24 hours a day five days a week, eliminating the risk of gaps found in the market. Of course gaps sometimes happen in the forex market, but not as often as in the stock market or bonds, so slippage is much less a problem.
Markets Always and Definitely Win
Some traders have discipline with continuous stop loss. Most traders, who get annoyed when exposed to a series of losing trades, tend to be stubborn and fight the market, often not even using stops at all. This is where leverage lies. The same process quickly generates profits can also cause huge losses. The end result is that many unscrupulous traders get a margin call and lose most of their speculative capital.
Conducting disciplined trading trends can be very difficult. If a trader is using high leverage, he or she just gives you a little room for the wrong (tight). Trading with very tight stops can often result in 10 or even 20 stops in a row before traders can find trading opportunities with strong momentum and direction.
Glued in distance span
For traders who do not like tight stops, they usually choose a range trading strategy. The term range trading is not tied to the meaning of the word distance. Trading in such price (ranging) environments isolates the price of a pair traded in the trend channel. The general practice of range trading is to sell at the top of the channel and buy at the bottom of the channel. This can be a very valuable strategy, but in essence, it is still a trend-based idea.
True range traders do not really care about directions. The assumption underlying the ranging trading is that no matter which direction the currency moves, it will most likely return to its original point.
In fact, many ranging traders rely on the possibility that prices will trade over the same level many times, and the trader’s goal is to harvest the oscillations for repeated profits.
The trading range obviously requires a completely different money management technique. Instead of looking for the right entry, the trader’s range more often enters the wrong position entry from the start.
Both of these trading strategies, trading trends and range of trading you can apply. But it must be remembered that the treatment of each strategy is different.