Forex trading is a huge market. Over $5 trillion is traded every day. Plenty of forex traders across the world make a living from it.
The aim of forex trading is relatively simple. All you’re trying to do is profit from currency movements.
However, in reality, this is harder than it sounds. To make consistent profits in the forex market, you need a solid trading strategy. This applies whether you’re an experienced trader or a total beginner. Finding a profitable forex trading strategy is essential.
With that in mind, here’s a look at three popular forex trading strategies for 2018.
Trend trading is one of the most popular trading strategies among forex traders. It’s used by forex traders of all experience levels. In its simplest form, a trend occurs when a market moves in one direction for a long period of time. Trends can be up or down. An uptrend is simply a series of higher highs. A downtrend is a series of lower lows. Once you have identified the trend, it’s possible to profit from it by trading in the same direction as the trend. If a currency is trending up, you want to be buying (going long). If a currency is trending down, you want to be selling (going short).
There are a variety of different technical analysis indicators that can help you identify trends. Some of the most popular indicators used to identify trends include moving averages, MACD, and the RSI.
Support and resistance
Another popular forex strategy among traders of different experience levels is the support and resistance strategy. In this strategy, you look to identify a currency’s support and resistance levels. Support is the level where the price finds it difficult to fall below. Resistance is the level where the price finds it difficult to go above. Once these areas are identified, you can look to place trades at the area where the currency’s price is likely to reverse. Indicators that are useful for identifying support and resistance include moving averages, the RSI, stochastic indicators and trend lines.
Lastly, Fibonacci retracement is another common strategy that is used by a large number of traders to profit from the forex market. Fibonacci ratios are a set of ratios that appear frequently in financial markets. The key ratios are 61.8%, 38.2%, 23.6% and 50.0%. Fibonacci ratios can be easily drawn on a chart. Often, when a security is trending, it will retrace to a common Fibonacci ratio. Then, once it hits the key Fibonacci level, it will resume its trend. As a result, Fibonacci levels can be used to identify reversal points. The ratios can be used to identify trade entry points. Fibonacci ratios are best used along with other indicators such as moving averages, trend lines and the MACD.
It’s important to remember that no trading strategy is perfect. As a result, it’s essential to have a proper risk management system in place at all times when trading forex