Top 3 Most Popular Trading Strategies

Trading Strategies

There are strategies that change from time to time and there are also those that stick for a long time.

Main reason why forex strategies become terminated or develop into new techniques is because of the fast pace at which technology is advancing. Several of the most usual foreign exchange techniques urges traders to be knowledgeable and have an understanding about trends.

Below is the list of the most lucrative trading strategies that are easy to learn, and can be used today.

Moving Averages

You have to understand how the MA or moving averages work before you can use this strategy. It is important that you know the different types of moving averages, like the SMA or simple moving average.

Moving averages work by choosing the close values of specific time, 10 days for instance and dividing them by the similar number.

They are beneficial because with MAs, you will be able to see the trends and reversals better as you keep track of the average value over a span of time instead of the current value, where this price fluctuates considerably in a very short time.

When the real-time value is above the moving average, this is perceived as uptrend. On the other hand, when it’s below the MA, it is perceived as a downtrend.

When the moving average switches from uptrend to downtrend, it’s called trend reversal. It is when the traders seek to buy/ sell. If the downtrend swaps to an uptrend that is the key signal to buy. When it is the other way around, that is the sign to sell.

You must keep in mind that moving averages only display the previous prices. MA will not give you the current prices. This only shows that you can’t merely depend on them particularly in respect to unexpected drop of prices.

forex strategies

Fibonacci Retracements

There are many traders who will offer you a chance to use tools for Fibonacci retracements. To take advantage of it, you must know whether a currency pair is on downtrend or uptrend.

Traders who utilize this tool seek for positions where the movement is reversed temporarily and will either sell or buy before the movement continues.

It is a great opportunity to purchase at a cheaper price and sell it later as the movement goes on if the tool is moving upward. Yet, if it moves downward, it is the chance to sell at higher value before the movement continues.

Make sure to finish it first before retracing the dip. It is done by waiting for movement to go on in the direction as it should. It is very important because if the trend keeps on following the dip, the technique will not work.

Preferably, you must not just rely on this tool in initiating your trades. It highly recommended that you put stop-losses below or above the retracements.

Channel Pattern

Using this strategy in forex trading requires you to have enough knowledge about trends, many brokers will offer you the capability to assess channel patterns aside from a charting software.

Channel patterns can be utilized to measure upwards and downwards trends, and know if the market is going off.

By using channel patterns on your charts, you can benefit from the dips in the trends, since trends never really straight up or down.

In channel patterns, it is vital that you see the signals of an ending trend because that will signify that your tool is no longer applicable. Failure to spot a changing trend can result  in losing trades.

These are only a few techniques that traders use today but there are a lot of trading techniques that you can use out there. Before finalizing which technique to use, make sure to have a good research and know what you’re about to embark on.