In this article, we will talk about the most important forex trading strategies, and we will also explain the charts used in forex trading. And if you are a beginner, I think that you need to know all the Forex terms before reading, then make sure to read the article to the end, so that you benefit.
What are forex trading strategies?
There are many strategies used in forex trading, both long-term and short-term. Trading is simply, for example, that the trader bets that the price of the currency will rise in the future and can benefit from it. He can predict this through some good technical analysis that fine-tune their approach to trading. We can classify trading strategies into four main types, and many strategies can be derived from them:
1- intraday trading
It consists of a lot of trades that the trader holds for seconds or maybe minutes at most. The amount of profit is the number of points, that is, it is very simple. But the profits of these trades are cumulative, which means that the small profits made on each individual trade turn into an amount of profit at the end of the day or at the end of any period of time.
In this strategy, traders rely on predictability of price fluctuations, and they cannot handle a lot of fluctuations. So traders who rely on such a strategy tend to restrict these trades to the most liquid pairs.
2- daily trading
These are short-term deals in which positions are held and liquidated on the same day. The duration of these trades is hours or maybe minutes. Traders who follow such a strategy need technical analysis skills and an understanding of technical indicators. These trades are based on incremental gains throughout the day for trading.
3- Swing trades
The trader in this strategy holds positions for longer than one day, perhaps holding the position for days or weeks. This strategy is often useful in major announcements by governments, or in times of economic turmoil.
This type of trading does not require constant monitoring of the markets throughout the day, as they have a longer time line. But this strategy needs to measure economic and political developments and their impact on the movement of the currency, in addition to its need for technical analysis.
4- Long-term trading
The trader holds the currency for a long period of time, which can last for months or even years.
What are the charts used in forex trading?
Three types of charts are used in forex trading, but let me tell you first that if you decide to enter the world of forex, you need to know some tips that you should know before trading in forex, and let us now learn about the types of charts:
1- Line Diagrams
Line charts are used to identify trends in the big picture of a coin. It is the most basic type and most commonly used by forex traders. It displays the closing trading price of the currency for the time periods specified by the user. The trendlines identified in the line chart can be used to devise trading strategies.
For example, information in a trend line can be used to identify breakouts or a change in trend for prices to rise or fall. Although it can be useful, a line chart is generally used as a starting point for further trading analysis.
2- Bar charts
Bar graphs are used to represent specific time periods. They provide more price charts than line charts. Each bar chart contains the opening price of the day, and a similar dash on the right represents the closing price. Each bar chart represents one trading day.
Colors are also used to indicate price movement. For example, green or white represents periods of high prices, while red or black represents periods of low prices.
3- Japanese candlestick charts
Japanese candlestick charts are the most visually appealing and are easier to read than other types of charts. The top of the candle represents the opening price, and the highest price point the currency is using. The bottom of the candle is the close, which is the lowest price point of the currency.
The lower candle represents a period of low prices, and is highlighted in red or black. While the bullish candle represents the period of high prices, and is shaded green or white.
It is worth noting that with candlestick charts it is easy to determine the direction and movement of the market.