Winning Forex Strategies

Find a suitable trading strategy(ies) which suit your personalities and time spent on trading. This is very important for you to be successful in trading. Data shows that over 80% of Forex trades last for seven days or less, which over 40% lasts for only two days or less. In other words, almost half of the traders in the world are trading for short period of time. With the development of computer science and programming, there is a rise in algorithm trading and High-Frequency Trading (HFT, watch documentary on HFT). Intraday trading or even trade in seconds has no doubt caused higher trading volume, leads to quicker pricing correction, reduces gap of market inefficiencies.

Let’s look at 3 most-common strategies: Forex Arbitrage Strategy, Forex Range Trading Strategy, and Forex Account Management Strategy.

Forex Arbitrage Strategy is mainly used by arbitrageurs, scalpers, and some of intraday traders. This group of traders has in-depth understanding of currency price inefficiencies. When there is a mismatch of pricing and other information (including news, supporting pairs, pricing from other providers etc.) <Read more on Arbitraging The Risk-Free Profit, coming soon>, traders will exploit the inefficiencies in between and make risk-less profit. This strategy is comparatively less complex than other two strategies, because what you need to do is just to find the loopholes in the market, unlike other strategies which you need to read plenty of news, master macro-economy of different entities etc. Drawbacks on this strategy are high transaction costs (due to high frequency), failure to capture (due to slow internet connection or incomplete algorithm calculations) etc.

Forex Range Trading Strategy, a relatively easy-to-use strategy. In simple words, this strategy follows the direction of currency pair: when it is up then buy; when it is down then sell. Of course it is not so easy in practical… The main question is: “How to identify the direction or trend?”. This is a state of art in determining the trend, read more on other articles to know more on this (including technical analysis, candlestick analysis, news analysis, investor psychology, market psychology, behavioral finance, currency pairs personality and more to cover). After the trend is determined, there are more questions to come:

• When to enter?
• When to close order?
• How far will it go?
• How to handle with the retracements in between?
• Should I set stop-loss for my trades?
• The order doesn’t look right, how to know am I wrong in this trade?
• If entered wrong trade(s), how do I minimize my loss?

(there will be a bunch more of questions you will ask…)

Don’t be panic, you will gain more experience and be more steady when unexpected events happen. We will answer the questions soon.

Forex Account Management Strategy, this is the most complex technique used by traders. To deploy this strategy, not only you need to know the market thoroughly, but also required you to have very high amount of trading funds sitting in your accounts. Therefore, this strategy is mainly used by professional traders in investment banks, commercial banks, national banks, hedge fund companies, broker houses, pension funds etc. They don’t usually look for short-term opportunities, but more on long-term profits. Some strategies commonly used are: Event Driven Strategy (take advantage of events such as mergers and restructurings), Global Macro (take advantage of systematic moves in major financial and non-financial markets, focus on major trends) etc.