Forex trading strategies can be developed by following popular trading styles which are day trading, carry trade, buy and hold strategy, hedging, portfolio trading, spread trading, swing trading, order trading and algorithmic trading.
Using and developing trading strategies mostly depends on understanding your strengths and weaknesses.In order to be successful in trade you should find the best way of trading that suits your personality.There is no fixed “right” way of trading; the right way for others may not work for you. Below you can read about each trading style and define your own.
Forex Day Trading Strategies
Day trading strategies include scalping, fading, daily pivots and momentum trading. In case of performing day trading you can carry out several trades within a day but should liquidate all the trading positions before the market closure.
Carry Trade Strategy
Carry trade allows to make a profit from the non-volatile and stable market, since here it rather matters the difference between the interest rates of currencies; the higher the difference, the greater the profit. While deciding what currencies to trade by this strategy you should consider the expected changes in the interest rates of particular currencies.
Forex Hedging Strategy
Hedging is generally understood as a strategy which protects investors from occurrence of events which can cause certain losses.
Portfolio / Basket Trading Strategy
Portfolio trading, which can also be called basket trading, is based on the combination of different assets belonging to different financial markets (Forex, stock, futures, etc.).
Buy and Hold Strategy
A trader who employs buy and hold investment strategy is not interested in short-term price movements and technical indicators. Actually, this strategy is mostly used by stock traders; however some Forex traders also use it, referring to it as a particular method of passive investment. They commonly rely on fundamental analysis rather than technical charts and indicators. This already depends on the type of investor to decide how to apply this strategy.
Spread / Pair Trading Strategy
Spread trading can be of two types: intra-market and inter-commodity spreads. In the first case traders can open long and short positions on the same underlying asset trading in different forms (e.g. in spot and futures markets) and on different exchanges, while in the second case they open long and short positions on different assets which are related to each other, like gold and silver.
Swing Trading Strategy
Swing trading is the strategy by which traders hold the asset within one to several days waiting to make a profit from price changes or so called “swings”.