Top 5 Forex Trading Strategies For Profitable Trading In Mexico

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Top 5 Forex Trading Strategies For Profitable Trading In Mexico

Top 5 Forex Trading Strategies For Profitable Trading In Mexico

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A forex trading strategy describes the system a forex trader uses to decide when to buy or sell a currency pair. There are various forex strategies that traders can use including technical analysis or fundamental analysis. A good forex trading strategy allows the trader to analyze the market and confidently trade with sound risk management strategies.

Forex strategies can be divided into different organizational structures that can help traders in finding the most effective strategy. The diagram below shows how each strategy fits into the overall structure and the relationship between forex strategies.

Top 5 Forex Trading Strategies For Profitable Trading In Mexico

Forex trading requires combining many factors to create a trading strategy that works for you. There are many strategies that can be followed, however, understanding and being comfortable with the strategy is important. Every trader has different goals and resources, which should be considered when choosing the right strategy.

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To easily compare forex strategies in three terms, we have placed them on a bubble chart. On the vertical axis ‘Risk Reward Ratio’ are the strategies at the top of the graph with the highest risk reward taken on each trade. Position trading is generally a strategy with a high risk-reward ratio. On the horizontal axis is the time investment which represents how much time is required to actively monitor the trade. The most demanding strategy in terms of your time resource is skin trading due to the high frequency of frequent trades.

Price action trading involves the study of historical prices to develop technical trading strategies. A verb of value can be used as a stand-alone form or in conjunction with an indicator. Basics are rarely used; however, it is not unheard of to combine economic events as a confirmatory factor. There are several other strategies that fall within the price action bracket as outlined above.

Price action trading can be used in different timeframes (long, medium and short term). The ability to use multiple time frames for analysis makes price action trading popular with many traders.

Within price action, there are range, trend, day, scalping, swing and position trading. These strategies cater to different types of trading needs which will be explained in detail below. Examples show various trading strategies with these strategies to show how different trading can be, as well as the variety of bespoke options traders can choose from.

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Starts on: Live now: Nov 28 ( 03:11 GMT ) Stay up to date with current trade analysis using price action Weekly Commodities Trading Prep Register for Webinar Join Now Webinar Ended 2. Range Trading Strategy

Range trading involves identifying support and resistance areas where traders will trade at these key levels. This strategy works well in markets without significant fluctuations and no trend is visible. Technical analysis is the main tool used with this strategy.

There is no set length for each trade as range bound strategies can be applied at any time. Risk management is an important part of this approach as outbreaks are possible. Therefore, a range trader would like to close any current positions that are bound in the range.

Top 5 Forex Trading Strategies For Profitable Trading In Mexico

Oscillators are widely used as timing instruments. Relative Strength Index (RSI), Commodity Channel Index (CCI) and stochastics are few of the most popular oscillators. Value action is sometimes used in conjunction with oscillators to further validate signals responsible for range or breakout.

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USD/JPY has been showing a long range bound price level for the past few years. The chart above shows the clear support and resistance bands that traders use as entry/exit points. The RSI oscillator shows the timing of entry/exit points as highlighted by blue and red colored boxes – blue: overbought and red: oversold.

Range trading can result in profitable risk-reward ratios however, this comes with a long-term investment in each trade. Use the pros and cons below to align your goals as a trader with how much resources you have.

Trend trading is a simple forex strategy used by many traders of all experience levels. Trend trading tries to generate positive returns by using momentum towards the markets.

Trend trading usually takes place on a medium to long term horizon as the trends themselves fluctuate in length. Like price action, multiple timeframe analysis can be adopted in trend trading.

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Entry points are usually designated by an oscillator (RSI, CCI etc) and exit points are calculated based on a good risk-reward ratio. By using the range of stop levels, traders can match that range or exceed it to maintain a good risk reward ratio e.g. If the stop level is set at 50 pips, the take profit level will be set at 50 or more pips away from the entry point.

In the simple example above, EUR/USD is showing an upward trend that is supported by high highs and high lows. The opposite can be true for a downward trend.

If you see a strong trend in the market, trade and observe the trend. For example, the strong rise in EUR/USD above.

Top 5 Forex Trading Strategies For Profitable Trading In Mexico

Using the CCI as a time entry tool, notice that each time the CCI dips below -100 (highlighted in blue), prices respond with a rally. Not every trade will work this way, but because this trend is followed, each dip causes more buyers to come into the market and drive up prices. In conclusion, identifying strong trends is essential to a successful trading strategy.

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Trend trading can be difficult with many variables to consider. A list of pros and cons can help you identify which trend trade is for you.

Position trading is a long-term strategy mainly focused on fundamentals however, technical methods can be used such as Elliott Wave Theory. Substantial market fluctuations are not considered in this strategy as they do not affect the broader market picture. This strategy can be used in all markets from stocks to forex.

As mentioned above, position trading has a long-term perspective (weeks, months or even years!) reserved for the persistent trader. Understanding how economic factors affect the markets or overall technical conditions, is important for forecasting trade opinions.

Key levels on long-term (weekly/monthly) time frame charts hold important information for position traders due to a broader view of the market. Entry and exit points can be judged using technical analysis like other techniques.

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The German 40 chart above shows an almost two-year head and shoulders pattern, which coincides with a potential drop below the neckline (horizontal red line) following the right shoulder. In this chosen example, the collapse of Germany 30 played out as planned technically and fundamentally. In late 2018, Germany experienced a recession and the US/China trade war hurt the auto industry. The Brexit negotiations have not helped at all as the possibility of the UK leaving the EU could also have a negative impact on the German economy. In this case, understanding technical patterns and having strong fundamentals allowed combining technical and fundamental analysis to create a strong trading opinion.

A list of pros and cons based on your goals as a seller and how much resources you have.

Day trading is a strategy designed to trade financial instruments on the same trading day. That is, all positions are closed before the market closes. This can be a single trade or multiple trades throughout the day.

Top 5 Forex Trading Strategies For Profitable Trading In Mexico

Trading periods range from very short-term (a matter of minutes) or short-term (hours), as long as the trade is opened and closed within the trading day.

Anatomy Of A Forex Scalping Strategy

Traders in the example below will look to enter positions when the price crosses the 8 period EMA towards the trend (blue circle) and exit using a 1:1 risk reward ratio.

The chart above shows a representative day’s trading setup using moving averages

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