In business, there are many routes to success. Some people achieve their goals using well-established techniques, while others experiment and succeed. The common factor that defines all successful people, though, is consistency. The forex market is known to be one of those that possess a great potential for those looking to invest. This market is enormous, and it gives opportunities to people with different investment goals. To succeed in this market, though, you need to be diligent in your work. You need to have a number of working strategies. There are indeed a plethora of strategies that can be used in forex trading. The following are the four simple forex trading strategies that actually work.
1. Breakout Trading
Breakout trading is excellent for beginners as well as experienced traders. The strategy is quite simple and straightforward. The most important rule for this strategy to work is following up on the trends closely so that you can identify the highs and lows. In breakout trading, the strategy is to buy breakouts on the charts to new highs and sell new lows. Many traders avoid this strategy because they think they might miss the opportunity if they do not anticipate the pullback. However, this is not usually the case, as pullbacks rarely affect the decisive moves. Waiting for too long thus ends up being a missed opportunity. In order to make this strategy work, you need to:
- Identify the long-term breakouts
- Use momentum indicators to identify the correct entry and exit positions
- Identify the important levels in the market and use them
The breakout trading strategy has excellent potential for traders. You can make huge profits with this simple strategy if you use it right.
2. Carry trade
The second forex trading strategy, which is simple to use, is carried trade. This strategy is important for traders at all levels. This is because it is relatively straightforward and it is also very effective. The carry trade strategy involves borrowing a currency that has lower interest rates and then proceeding to use it to buy one that pays a higher interest rate.
The trader not only takes advantage of the interest rate discrepancy, however. There is also an underlying expectation that the currency purchased will also be on an upward trend such that it can make profits due to the appreciation of value. The carry trade strategy is quite simple to apply. It is essential to look at the direction of the market especially at what is being forecast. Carry trading involves taking advantage of expected changes in currency policies. In order for this strategy to work, a trader needs to:
- Invest in a currency that is on an upward spread
- Take advantage of interest rates
- Know exactly when to sell the investment
The third strategy that promises yields to traders and is also simple to master is the scalping strategy. The scalping strategy is the most direct strategy of all other trading strategies. Scalping in forex involves focusing on the low-margin segment of the market. Traders who use this strategy focus on the short-term discrepancies in the currency exchange rate to make profits. A trader can, therefore, initiate and close several trades in a single day and end up accumulating several small trades. In order for your strategy to work as a scalper, you will need to:
- Have a firm exit strategy
- Initiate and conclude trades at every chance you get
- Focus on the short-term trend and not the long-term trend
Scalping is a simple but energy-intensive strategy. The low risks associated with the trade attract most beginning and experienced traders.
4. Swing trading strategy
Finally, swing trading involves anticipating the overbought/oversold situations in the market. The market usually has a long-established trend that involves many phases of overbought or oversold scenarios. During these levels, the prices are extended further out of the expected margin. These areas present opportunity to swing traders because they readily identify with simple trend lines. As a swing trader, the only thing you need to do is to confirm the volatility with a technical indicator and then enter the trade when you have established the levels of support and resistance. This strategy is also a short-term trading strategy, and you can do many trades within a trading session.