Long-term Investment Strategies For Canadian Forex Traders

Long-term Investment Strategies For Canadian Forex Traders – We all know that forex trading can be difficult to get started, but finding the right forex strategies to trade with is the key for beginner traders to enter the forex market.

The forex market is the largest and most dynamic financial market in the world. With an average daily trading volume of $6.6 trillion, it is more than double that of the New York Stock Exchange, making it an attractive area for traders.

Long-term Investment Strategies For Canadian Forex Traders

Trading currencies can be a worthwhile endeavor for those willing to take the risk. However, there are many mistakes that beginners should avoid if they want to be successful in the long run.

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Continue reading to discover forex trading strategies that work and some of the insights you need as a beginner trader to be successful in the forex market. But first, understand exactly what a forex trading strategy is and how to choose the right one for you.

A trading strategy can be described as a set of rules that help a trader determine when to enter a trade, how to manage it, and when to close it. A trading strategy can be very simple or very complex – it varies from trader to trader.

Traders using technical analysis will find it easier to define entry/exit rules, while traders using fundamental analysis may find it a bit more difficult as there is more judgment involved. Regardless, every trader should have a strategy in place, as this is the best way to achieve consistency and help you measure your performance accurately.

Very few traders immediately find the right forex strategy. Most will spend a significant amount of time testing different strategies with a demo and/or withdrawal trading account. This allows you to conduct your experiments in a safe and risk-free environment.

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Even if a trader gets to the point where they find a strategy that shows promising results and feel right, it is unlikely that they will stick with that exact strategy for long. Financial markets are constantly evolving, and traders must evolve with them.

If you are a beginner, maybe stick with simple strategies. Many beginners make the mistake of trying to incorporate too many technical indicators into their strategy, which leads to information overload and conflicting indicators. You can always change your strategy as you go along and use the experience you’ve learned from withdrawals and demo trading.

Price action trading is a strategy that focuses on making decisions based on the price movements of a particular instrument instead of incorporating technical indicators (eg RSI, MACD, Bollinger Bands). There are a variety of price action strategies you can use – from breakouts to reversals to simple and advanced candlestick patterns.

Technical indicators are usually not part of a price action strategy, but if they are included they should not play a major role in it but instead be used as a supporting tool. Some traders like to mix simple indicators such as moving averages because they can help identify trends.

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The benefits of price action trading are that your charts stay clean, and there is less risk of suffering from information overload. Having multiple signs on your chart can send conflicting signals, which can cause confusion, especially for beginners.

Reading price action can also give you a better feel for the market and help you identify more effective patterns. Another reason price action trading is especially popular among day traders is that it is more suitable for traders who profit from short-term movements. With day trading, you need to make decisions quickly, and having a “clean chart” and simply focusing on price action will make this process easier.

Below is an example of a simple breakout trading strategy. 1.1772 was an important support level and our trader expected a breakout, so they could short EUR/USD to take advantage of the next leg lower. We can see that the general trend is in their favor (bottom line). A breakout occurred and the currency pair fell more than 70 pips before finally finding support at 1.1700.

Some traders prefer to trade when the price breaks below a key support level (perhaps with a sell stop order), while other traders will wait to observe the price action and then take action. False claims do occur often, so it’s important to have appropriate risk management rules in place to deal with them.

Pair Trading Strategy

Traders using a range trading strategy will look for trading instruments that overlap in a certain range. Depending on the time you trade on, this rate can range from 20 pips to several hundred pips. What the trader is looking for is continuous support and resistance areas that hold – that is, the price breaking out of the support area and the price being rejected at the resistance area.

Traders using this strategy should look for trading tools that are not trending. For this, you can simply look at the price action of the instrument, or use indicators such as moving averages and the average direction indicator (ADX). The lower the ADX value, the weaker the trend.

After you have found a suitable trading tool, you need to know the area that the trading tool combines within.

A classic range trading strategy will tell you to sell when the price hits a key resistance zone and buy when the price hits a key support zone. Some traders will focus on two specific levels, while others will trade “bands” or “zones” – for example, if you have set 1.17 as a key resistance level but the price often rests at 1.1690 or 1.1695, you can highlight that zone. (1.1690 – 1.17) and start looking for selling opportunities within it. Focusing only on that particular level may mean that you will miss out on good trading opportunities, as prices often reverse before hitting them.

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Below is an example of a currency pair that is line trading (EUR/SEK). ADX often has low readings, and we can see that the price has often retreated from the 10.00/04 support area while having difficulty breaking the resistance area between 10.27 and 10.30.

Trend trading strategies are the exploration of trading opportunities in the direction of the trend. The idea behind it is that the trading tool will move in the same direction as it is currently trending (up or down).

When prices are constantly rising (posting highs), we are talking about an uptrend. Conversely, falling prices (making the instrument of trade lower) will indicate a downward trend.

In addition to looking at price action, traders can use supporting tools to identify trends. Movement rates are one of the most popular. Traders can easily see if the price is above or below a trading moving average (the 200 DMA is a popular and often watched one) or use MA crossovers.

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To use moving average frames (which can also be used as entry signals), you have to set up a fast MA and a slow MA. A popular example is the 50 DMA and the 200 DMA. A 50-day moving average that crosses the 200-day moving average may indicate the beginning of a trend, and vice versa.

The goal of position trading is to take advantage of long-term trend movements while ignoring the short-term noise that occurs day-to-day. Traders using this type of trading style may hold open positions for weeks, months, and in rare cases – years.

Along with scalping, it is one of the more difficult trading styles. It requires a trader to remain highly disciplined, able to ignore the noise, and remain calm even when a position moves against them by several hundred pips.

Imagine, for example, that you had a bearish view on stocks at the beginning of 2018. You shorted the S&P 500 at the beginning of the year, intending to keep the position open until the end of the year. While you would have enjoyed the price action at the beginning and end of the year, the rally from March to September could have been a painful experience. Only a few traders have the discipline to hold their positions for such a long time.

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Day traders usually do not trade for just seconds, as scalpers do. However, their day trading also focuses on a particular session or time of day when they try to act on opportunities. While scalpers can use an M1 chart to trade, day traders tend to use anything from the M15 to the H1 chart.

Scalpers tend to open more than 10 trades per day (some very active traders may end up with more than 100 per day), while day traders usually take it a little slower and try to find 2-3 good opportunities per day.

Day trading can be good for you if you want to close your positions before the trading day ends but you don’t want to have the high level of pressure that comes with scalping.

When scalping, traders try to take advantage of small intraday price movements. Some even have a target of only 5 pips per trade, and the duration of the trade can vary from seconds to several minutes. Scalpers must be good with numbers and able to make quick decisions, even under pressure

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