The world of Forex trading has evolved over the past several years and is now one of the most widely used trading platforms in the world. For new traders, it can be a bit overwhelming trying to learn all the terminology and finding strategies you feel comfortable with, but sometimes it all boils down to the broker you choose to trade through.
The best brokers are those that offer the widest assortment of tools and will help you keep current with technology that helps you trade, no matter which strategies you choose.
Are you ready to start trading on currency pairs? Let’s begin with five of the most popular Forex trading strategies.
First a Word About MT5
This may be a new term for you, but don’t be alarmed just yet. MT5 is simply the most recent hi-tech trading platform that enables you to trade using any strategy you are most comfortable with. Since MT5 is labelled an ‘institutional platform’, you would need to find brokers who offer this download, but they are becoming increasingly common which you’ll see if you look at this list of the best MT5 brokers according to InvestinGoal. Basically, it is an online cross-platform program that enables you to trade based on any number of strategies. That’s where the following five strategies that are known to work wonders come in.
1. Copy Trading (If Done Right)
While copy trading, sometimes referred to as mirror trading, isn’t in and of itself a strategy, it is if you work it right. Basically, copy trading is probably the best strategy if you are new to Forex because it allows you to copy the strategies used by traders who have reached a certain level of success. It isn’t always easy to know which style of trading best suits you, so take the time to observe the ‘wins’ of a few seasoned traders before copying the strategies they use. In time, you will learn which strategy, or strategies, feel most comfortable to you, which why this is a great place for newbies to get their trading feet wet.
2. Swing Trading
Some trading strategies are on the spot trading strategies (day trading) and others are longer in duration. Swing trading is known to be one of medium duration where you hold onto your pairs over a period of time from a few days to maybe a few weeks. The concept of a ‘swing’ trade is to find that one single move you have mapped out and then trade within one to four hours.
3. Position Trading
Speaking of longer-term trading strategies, position trading is a long-term approach. Traders hold their pairs for weeks, maybe even months before trading. The one thing to be aware of with this approach is that you will need a sound understanding of the market and will need to analyse market variables such as the GDP, retail sales, and even the NFP. These are called market biases and they are what you plug into your platform to raise an alert when the factors meet your criteria.
4. Day Trading
Without a platform like MT5, you wouldn’t really want to be a day trader. This is a volatile market and it only takes one market influence to send a currency spiralling downward or shooting upwards with the speed of a rocket launcher. Timeframes for trading tend to fall within a five to fifteen-minute period, so you need to be ‘on it.’ If you work while your market of choice is open, you may lose the ability to trade as needed. However, having said all that, there are bots in your software you can set up to make the trades for you. It’s a matter of finding a user-friendly platform like MT5.
5. Scalping (Good, but with Reservations)
If you are a retail trader, this is not the method of choice for you because the tendency is for losses to exceed gains due to transaction costs. Of all the strategies mentioned here, this is the fastest and consequently the most volatile of all. You only hold those trades minutes, sometimes even just seconds, before trading and you need a lot of market knowledge to be fast enough to succeed. You MUST understand market influencers and how the market is doing moment by moment. It takes a split-second decision, which is something newer traders aren’t prepared to make, and sometimes by the time they act, the market has righted itself again, resulting in a loss.
Again, these are strategies you would use when trading while MT5 is a platform through which you’ll make the trades. MT5 is the latest advance in Forex (and other instruments such as stocks, CFDs, indices and even futures and/or options). So, as you can see, you need to learn the strategies to plug into your platform that you can automate to be there when you can’t. Just remember, if you are new to Forex, use strategies that are long-term. You can always copy other successful traders to begin understanding how it’s done, but in the end, you’ll find that one strategy that you are most comfortable with and will work amazingly well for you.