Trading Economics

Trade News Center

Strategies for Forex Traders


Forex is the biggest and most liquid financial market with the biggest turnovers of all financial markets. Once you learned how to trade and use the tools, you might want to work on your strategic approach to making your profits more steady and efficient. The thing is that Forex trading requires strategies which differentiates it from gambling. You probably have already noticed that your platform offers you different tools that you can customize or set up to optimize trading results. Forex is also the extracurricular activity for people besides their regular jobs, and the largest Forex group includes part-time traders. Being a part time trader does not mean that you are an inactive or passive trader as long as you regularly come back and place your trades. One of the downsides of not being present at all times is missing out on market opportunities, which can lead to loss of funds. If the bought currency pair suddenly drops in value while you are at work, you might miss the opportunity to sell it on time and safe some money. Even in these cases, certain strategies were developed to avoid such failures and to get the most out of the situation

Night Traders

Many people prefer night hours to trade, but they encounter the problem of a still and not moving market since the active movements take place during day time. It makes no use to trade the USD in the night. What night traders can do is to trade currencies that are active at night like the AUD (Australian Dollar) or JPY (Japanese Yen). Make use of the different time zones, since when it is night in New York, for example, it is daytime in Australia and the Australian trading sessions are taking place while the USA market stands still. Use the benefit of the globalization to improve your trades.

Pop-in Pop-out Traders

This category refers to traders who casually enter the market during the day like lunch or coffee break. These inconsistent traders can also use some other strategies to help their cause. The inconsistent trader should always look after the most active pairs during his trading time. This implies knowing the schedules of trading sessions in different markets and taking into account opening hours for trading like in New York, London, Sydney, etc., which are mostly active until noon. From noon until afternoon usually European and Japanese markets take over. This information need to be studied before placing any investments, as well as the market as a whole and currency movements. Picking the most active currency pair is not enough, but it has to move according to your predictions if you want to trade successfully.

Stop-Loss Orders

Luckily, many automated options are available with each trading platform, and the Stop-Loss and Take-Profit options are the best known. No one expects you to watch over the market day and night and if you placed a trade and needed to go somewhere, then simply activate the Stop Loss or Take Profit option. You simply enter the amount at which you want to sell your option if the market moves against your favor and it will sell the currency pair at the amount stated, as well as take the profit at the entered amount if it reaches that far.

Chart Reading

You can make your trading decisions based on chart analyses where you observe how the currency pair moves you want to trade. It simply refers to looking at the higher highs and lower lows bars and where they are heading. Make sure to use the chart that best suits your schedule, if you are there for an hour or two, choose the hourly chart.

Other Tips

If you are a trader that has no time to observe the market, besides the above strategies, some other tricks can be applied for more successful trading. You can, for example, place fewer trades which last for several days. You do not have to keep dozens of trades at once, especially if you are a part-time trader, but take as many positions as much as you can follow them. Trades with longer timeframes can always be backed up with Stop Loss options so that you still get to keep your money if things start to go against your predictions.

Part-time traders can also benefit from daily and weekly charts. Looking for a long-term trend enables you to only check once a day your trading activity, as opposed to placing hourly trades.

Use Trading Tools

Exit-enter trade options are in line with Stop Loss and Take Profit options, so they come in handy from time to time. If you want to stay in the loop with the market events, you can also use features such as SMS or e-mail alerts where big and small market changes and events will be emailed or texted to you. In that way, you can keep an overview of what is going on in the market without being constantly logged in to your account. Use all available tools and options that can help you cope in the market.

Hedging and Scalping

These two strategies are somewhat more sophisticated and represent options of how to trick the market. They are also mostly used by active traders who have more time to trade since they involve close market observation. Hedging is a risk-reducing strategy where a trader goes for two different but correlated currency pairs (like the USD/GBP and USD/EUR) at the same time but takes opposite directions, as in one trade the trader predicts the USD goes up, and in the other that goes down. In that way, the trader creates a safety net when trading under risky conditions.

Scalping or small-volume trading is taking advantage of small price gaps of the bid-ask spread. The rule is to go in and out of a position for several hours, where traders buy pairs at the ask price but then try to sell it at the bid price to someone else. Trades have to be short and executed quickly lasting for few minutes or even seconds. Hedging and scalping usually require certain trading experience to work properly, so beginners might not enter trading at this level until they are completely ready.