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There are several types of forex traders and each one of them has to adopt techniques and methods to fit the strategies. Each trader needs to find their own unique trading style based on the frequency of trading and selected assets.
Overall, forex trading strategies can be classified into three basic categories focusing on range, trade or breakout techniques. Below are each of the main strategies you can find in trading:
Range Trading
With range trading, you need to get up-close-and-personal with technical analysis and, more precisely, with the sideways moving markets. The idea of range trading is to find the horizontal price pattern between support and resistance area. As soon as the area in question is located, traders can take advantage of the moment. The range is known for its low volatility and is perfect for profit making.
Breakout Trading
A breakout can be spotted when a price movement overcomes support or resistance level. Once the breakout occurs, you can anticipate increased volatility and volume.
The breakout strategy focuses on buying an asset when the price is breaking through resistance line and selling when the price is breaking through support line.
An experienced trader will catch the signs of breakout and adopt to take advantage of the next market move. The beauty of breakout trading is in the fact that you do not need to be in front of your PC in order to make profits. Entries can be set automatically once the price reaches the specified level.
Retracement Trading
Another strategy that cannot be overlooked is the retracement method. Retracement gives you the percentage increase or decrease in market movement in the same direction after reaching a new high or low.
Trend traders seek advantage in strong market movements. Retracement method is one of the favored methods among traders, which requires patience and persistence. With retracement, you have to wait for a pullback of a trend and enter into the market.
In order words, after an advance, a retracement can be defined as a decline that continues the path of a portion of the previously witnessed advance. After a decline, a retracement is an advance that retraces a section of the previous decline.
