If you, while testing out the Forex market, opened some random trades, then you have surely noticed the basic idea in the Forex market, and it is that all opened trades will lead you to gain or lose, it is a very simple idea, choosing the direction and time right will lead you to achieve gain, but the important question is how to choose the right direction?
The simple truth is that if there is way to guarantee you to always choose the right direction, then everyone will be rich, but in fact there is no foolproof way to choose the right direction all the time because of the continuous movement of the market, but nonetheless there are a number of strategies that have been tested and that can represent an excellent base for making decisions which increase the chances of profit.
Trading strategies are pre-planned steps based on the information currently available in the market, and there are so many trading strategies in the Forex market, and you can find many of them for free via internet search. there are also books about these strategies and there are people who are willing to teach you them for a certain price.
Experts all over the world always fully abide to at least one, and usually mention that their success is due to following a strategy or multiple trading strategies. The following section is about some of the strategies used by many traders and investors around the world:
MARKET DIRECTION STRATEGY
The market direction strategy is simply to follow the direction clearly is taken by the market in a certain period of time, as currency pairs in general head to either bullish trend or bearish trend.
And you can, by following the direction taken by a certain currency pair, rely on the continuation of this pair in that direction in order to achieve a profit from following the market, that strategy is the most famous among the different ways to trade currencies.
Trends can be long or short, as trends can be spread over a long period of time, for example of the emergence of a bullish trend for the AUD / USD pair in a period of 6 months, even though that period contains two short opposite bearish trends.
If at the beginning of the period you opened a long position, and closed it at the end of it, you will make profit, that is why you must be careful in the selection of trends that you are going to place your trades on, as sometimes when you see a clear trend on the chart, it fades once you expand the chart to include a longer period of time, so when you look for a trend to trade on, make sure to choose the appropriate time scale.
The oscillation strategy is simply when you find that a currency pair trades between a certain price range, and it seems to jump between a top-level and a lower-level in that range consistently, as investors can use the higher price as an opportunity to sell, while using the lower price as an opportunity to buy. That pattern appears as a wobbling line on the linear chart, and it represents an opportunity for traders who follow the oscillation strategy.
Breakthrough strategy depends on breaking through an trend, where the driving force is usually stronger in the direction of the breakout, as many traders exploit the Breakthrough strategy when the oscillating direction breaks through a lower or upper limit of a currency pair.
NEWS RELEASES STRATEGY
The news releases strategy is simply to trade around the release of economic news, where the Forex market takes reaction to those news, especially interest rates news, as well as the unemployment rates.
Traders following this strategy keep in mind that the movement of the Forex market has already been affected by the projected expectations before releasing the news, where the cause of the sharp moves that occur in the Forex market movement is due to the corrective movement that follows unexpected news, whether that news is better than expected or worse than expected.
Traders also takes trading in mind that during the period of the negative expectations toward news, the market heads for the low-yielding currencies which are regarded as safe currencies, like the U.S. dollar or the Japanese yen in particular.
For this reason, a good understanding of the global economic situation is a must to all who wish to use this strategy, as they’re advised to follow an economic news calendar, which shows the dates of important news releases and economic data such as salaries payroll, interest rate and GDP.
Economic calendars also show the expected level of economic data to be released, compared to previous levels, and if the actual data is worse than expected, the currency of that country will take a negative reaction.