The key to sucessful forex trading is to have a winning strategy established beforehand. This is the foundation of successful trading on the Forex. Your strategy will provide you with the best reward to risk ratio you can achieve. The important thing to remember is that your trading strategies should be discipined and attempt to limit risk, while at the same time maximizing your position in the market.
One strategy to consider is the Simple Moving Average (SMA). The SMA is based on a study over twelve periods, each period being 15 minutes. This is an example of a trading decision based on a well thought out strategy. This strategy uses a simple algorithm to calculate the best time to buy and sell. As the price of the currency crosses the SMA, it is a signal to stop and reverse.
Therefore, a long position will be eliminated while establishing a short postion. Both use market orders to conduct the trades. This system keeps trades in the market at all times using either short or long positions as applicable.
The use of support and resistance levels is another strategy that can be implemented. This also is a technical analysis strategy that comes from an analysis of support and resistance. The theory behind this strategy is that the market trades above support levels and below resistance levels. When a support or resistance level is broken, then the market will follow through in the direction of the current momentum. Using historic information, the levels can be determined by analysis.
The ballon option strategy is seen as an unusual approach to trading. When you utilize a balloon option, when triggers are reached the option increases in size. For example, assume a trader believes that the dollar will continue to gain strength against the euro over time. Currently the euro is trading at 100 and the trader believes the price will break 110 against strong resistance. So instead of buying dollars at 100 for the next 6 months, the trader will buy “at the money” call with a trigger of 110.
As a result the trader possesses a 100 call with a USD 110mm. However if the trade is above 110, the 110 call will double to a USD 20mm.
Another strategy worth looking at is the double bottom. Double bottoms are significant in that they indicate a potentially major change in sentiment and trend. This can be used for all time frames. Many powerful intraday and even long term bull markets result from this concept. When prices remain stable and do not break support when the markets are downward trending, there are powerful changes in the trend. This signal is important. Often a trader will start a double bottom trade during the high of the 2 troughs. This high is a secondary resistance and shows that the price is changing again. Stops are placed near the intended lows to protect against a low that would negate the strategy’s premise.
The Ichimoku chart represents another potentially useful strategy. The chart uses a number of indicators. These identifiers show the support and resistance levels, and present signals to the trader on when to move in a similar manner to moving averages. The benefit of the Ichimoku chart is that it looks at wider support and resistance zones, and it shifts forward with trading time. This all reduces the risk of false breakouts. These charts are based on the existence of trends, direction, support and resistance. The four main lines are: Turning Line = (Highest High + Lowest Low) / 2, Covers the most recent nine days Standard Line = (Highest High + Lowest Low) / 2, Covers the most recent twenty six days Leading Span 1 = (Standard Line + Turning Line) / 2, Covers the future twenty-six days Leading Span 2 = (Highest High + Lowest Low) / 2, This covers the past fifty days, and is plotted twenty-six days ahead of today s date.
Before you choose a strategy, make sure you have studied all of the pertinent data and understand all of the ramifications of your actions.
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