Different Trading Strategies

[Vichu]

REVERSAL TRADING
As the name implies, reversal trading is when traders seek to anticipate a reversal in a price trend with the aim to guarantee entrance into a trade ahead of the market.
This strategy is considered more difficult and risky. True reversals can be difficult to spot, but they’re also more rewarding if they are correctly predicted.
Traders use a variety of tools to spot reversals, such as momentum and volume indicators or visual cues on charts such as triple tops and bottoms, and head-and-shoulders patterns.

POSITION TRADING
Position trading is a long-term strategy that may play out over periods of weeks, months or even years. Position traders often base their strategies on long-term macroeconomic trends of different economies. They also typically operate with low levels of leverage and smaller trade sizes with the expectation of possibly profiting on large price movements over a long period of time.
These traders are more likely to rely on fundamental analysis together with technical indicators to choose their entry and exit levels. This type of trading may require greater levels of patience and stamina from traders, and may not be desirable for those seeking to turn a fast profit in a day-trading situation.

[Vishnu]

CARRY TRADE
Carry trade is a unique category of forex trading that seeks to augment gains by taking advantage of interest rate differentials between the countries of currencies being traded.
Typically, currencies bought and held overnight will pay the trader the interbank interest rate of the country of which the currency was purchased. Carry traders may seek out a currency of a country with a low interest rate in order to buy a currency of a country paying a high interest rate, thus profiting from the difference.
Traders may use a strategy of trend trading together with carry trade to assure that the differences in currency prices and interest earned complement one another and do not offset one another.



PIVOT POINTS
Pivot point trading seeks to determine resistance and support levels based on an average of the previous trading session’s high, low and closing prices. This average is considered to help predict the next likely highs and lows, and intraday market reversals.
Because these averages are widely used in the market, they are considered a healthy gauge for how long a short-term trend may continue, and whether a particular range has been surpassed and a new price trend breakout is occurring.

[Andre Silva]

MOMENTUM TRADING

Momentum trading and momentum indicators are based on the notion that strong price movements in a particular direction are a likely indication that a price trend will continue in that direction.
Similarly, weakening movements indicate that a trend has lost strength and could be headed for a reversal

Can you please mention any name of momentum tool? Default technical tool would be better. Thanks in advance.

[Marcus Reilly]

fundamental analysis:-

in this type of strategy we will look at the fundamental indicators of an economy to understand whether a a currency is undervalued and how its value is likely to move relative to another currency.This can be highly complex, involving the many element of a country's economic data that can indicate future trade and investment trends.

Thank you very much for your post! By the way, what’s your suggestions to trade on high voltage news like NFP, FOMC? I am hardly waiting to know your answer.

[Ricard Dorman]

Technical analysis- is another main category of currency trading strategies ie highly favored among traders.
Most often it involves reviewing the past and recent behaviour of currency price trends on charts to determine where they may move going forward.
The rationale behind using technical analysis is that many traders believe that market movements are ultimately determined by supply, demand and mass market psychology, which establishes limits and ranges for currency prices to move upward and downward.

Well, when I was a new trader then I thought, Forex is all about the technical tool based trading; even I depended on only the default trading tools. Yes, it’s not proper way of trading. Right now, I try to understand the technical languages of market based on Price Action trading strategy; besides I use fibo, trend line & horizontal lines.

[Ricard Dorman]

TREND TRADING
Trend trading is one of the most popular and common forex trading strategies.
It involves identifying an upward or downward trend in a currency price movement and choosing trade entry and exit points based on the positioning of the currency’s price within the trend and the trend’s relative strength.

It’s called: trend is our friend. This is why, my main intention is following the current market trend; in my trading I always try to follow the trend trades only, till now I have no interest on reversal trading opportunity.

[Ricard Dorman]

Range trading is a simple and popular strategy
This based on the idea that prices can often hold within a steady and predictable range for a given period of time.
That’s particularly evident in markets involving stable and predictable economies, and currencies that aren’t often subject to surprise news events.
Range traders rely on being able to frequently buy and sell at predictable highs and lows of resistance and support, sometimes repeatedly over one or more trading sessions.
Range trading is a simple and popular strategy based on the idea that prices can often hold within a steady and predictable range for a given period of time.
That’s particularly evident in markets involving stable and predictable economies, and currencies that aren’t often subject to surprise news events.
Range traders rely on being able to frequently buy and sell at predictable highs and lows of resistance and support, sometimes repeatedly over one or more trading sessions.

According to me, all ranges are not so simple, only horizontal rangers are. Since the upper & lower levels of horizontal range are too easy to mark. On the other hand, others rangy structures are challenging to use because of uncertainty on TP & SL levels.

[Zachary Davis]

SWING TRADING
Swing trading is customarily a medium-term trading strategy
This is often used over a period from one day to a week.
Swing traders will look to set up trades on “swings” to highs and lows over a longer period of time.
This is to filter out some of the “noise,” or erratic price movements, seen in intraday trading.
It’s also to avoid setting narrowly placed stop losses that could force them to be “stopped-out” of a trade during a very short-term market movement.

To be honest, swing trading is my most favorite type trading style. Because, my strategy doesn’t support scalping. On the other hand, I can’t hold my trades for couple of weeks, so long-term trading is not appropriate for me. In addition I mainly use D1 for swing trading.

[Zachary Davis]

BREAKOUT TRADING strategy is a method where traders will try to identify a trade entry point at a breakout from a previously defined trading range. If the price breaks higher from a previously defined level of resistance on a chart, the trader may buy with the expectation that the currency will continue to move higher. Similarly, if the price breaks a level of support within a range, the trader may sell with an aim to buy the currency once again at a more favorable price.

If you ask me on the most challenging trading session, then my answer will be ‘Breakout Trading’ for sure. Before breaking any specific level, we don’t know final result rather it’ll break or not! This is why, most of the time, I don’t use breakout trading opportunity. But sometimes I do with the half trading lots size.

[Zachary Davis]

RETRACEMENT
Retracement strategies are based on the idea that prices never move in perfectly straight lines between highs and lows, and usually make some sort of a pause and change of their direction in the middle of their larger paths between firm support and resistance levels.
Retracement traders will wait for a price to pull back, or “retrace,” a portion of its movement as a sign of confirmation of a trend before buying or selling to take advantage of a longer and more probable price movement in a particular direction.
Traders will often pick a particular percentage movement as a sign of confirmation (such as 50%), or rely on Fibonacciratios (of 23.6%, 38.2% or 61.8%) to help identify optimal points for entering and exiting trades.

I use this kind of setup, according to the importance of the specific level. But I think, retracement trading is relatively easy than the breakout trading since the level is clear here. By the way, there is nothing like 100% in Forex, so I always use SL in my trading.