Five Basic Forex Trading Strategies
While on the verge of a big win or a big loss, it’s very tempting for traders to let their emotions take over and panic-trade. It should come as no surprise that panic-trading rarely produces a favourable or calculated outcome – and will likely result in regrets later. But how do you overcome market jitters and retain a cool head during turbulent trades?
One way is to follow a well-formulated trading strategy. In this article, we’ll take a look at five of the most popular strategies, explaining how these can be used to improve your trading and fight the urge to let your emotions take over.
#5 The Bladerunner Trade
The Bladerunner Trade is ideal for those who are at the beginning of their trading journey. It’s simple to follow, effective on the markets, and has an intriguing, space-age name.
How it works
The Bladerunner Trade is a forex price action strategy, using pure price action. It’s frequently used in conjunction with pivot points, candlesticks and support and resistance levels.
This strategy uses a 20-period exponential moving average (EMA) or the middle Bollinger band. This EMA divides the price in half, giving the strategy its name. When the prices move above or below the EMA line and retest several times, trading signals are generated. When this happens, it’s likely that a long-term trend will not move to the other side of the EMA. However, a trend may fluctuate to the other side in the short-term, before settling later on.
#4 Daily Fibonacci Pivot Trade
This strategy combines two popular indicators into one strategy. Pivot points and Fibonacci retracements are brought together to produce an approach which gives traders an idea of where they might find strong areas of support and resistance.
How it works
Traders wait for the Fibonacci retracement line and the pivot support line to converge, when trading long on an uptrend. The indicators highlight areas where the trader might go long and short based on whether these points are support or resistance areas. The Fibonacci line should steer the decision making, backed up by the pivot points.
#3 Bolly Band Bounce Trade
Bolly Bounce trading is one of the most popular strategies. This approach is ideal for steady markets which move around a reliable range. Built upon the principal that prices usually revert back to their mean average, this strategy is a popular device for indicating when traders should buy and sell.
How it works
Bollinger Bands mark support and resistance levels with two lines, sandwiching the asset in the middle. Based on the assumption that the price of an asset will not break support and resistance levels, the price will bounce of the bands and return towards the centre. This means that a trader might decide to sell when the price reaches the upper band and choose to buy when it reaches the lower band. However, traders using this strategy should be cautious when making a trade – it is common for prices to remain along the bands instead of bouncing completely away from them and back to the middle.
#2 The Pop ‘n’ Stop Trade
How does a trader take advantage of sudden unexpected price movements? With the Pop ‘n’ Stop Trade! This strategy is dedicated to helping traders profit from these sudden movements when they happen, instead of chasing after them when they’ve long passed.
How it works
This approach combines indicators, including rejection bar candle patterns, to indicate where a price might go next. Pop ‘n’ Stop refers to a price breaking the upside of its previous range and momentarily stopping. At this point, the strategy aims to determine where the price might head next. It’s common for traders to place limit orders ahead of the rejection bars to help mitigate risk.
#1 London Hammer Trade
This strategy is particularly popular with those trading gold, and is named after the London market. When this market opens, it’s typically followed by a period of volatility given that London sets the benchmark for gold international prices.
How it works
This strategy works by using a candlestick chart and locating a ‘hammer’ pattern. This occurs when the trading value of an asset falls from the opening price and then rockets up to either above or close to its starting price. This forms an abstract hammer shape, with a short body and narrow shaft. Used in conjunction with support and resistance lines, this provides an indication of how the markets might react during the rest of the day.
Following one of these trading strategies will provide you with a structured approach to trading and decision making. By committing rigidly to a strategy, it’s easier to take logical steps in high-pressure situations – saving you those post-trade regrets and taking you a step closer to trading mastery.
Disclaimer: The content of this article is personal opinion and should not be considered as investment advice or suggestion towards any trading activity.