Have you dedicated time and effort to understanding the basics of FX trading? Maybe you’d like to profit from the current market’s volatility, as The Deutsche Bank Currency Volatility Index climbed towards 10% beginning of March 2022? Then perhaps you are ready to delve deeper into some more advanced trading strategies. Below are five advanced forex trading strategies you should learn to take your trading to the next level.
Price Action Trading Price Action refers to making all trading decisions based only on the price chart available to you. This trading technique requires a significant amount of knowledge about technical analysis as trading happens based on support and resistance areas of specific trends. Price action trading can be performed by both humans and computers, making it an exciting option for traders trying to pick up on particular skills to turn a profit trading currency pairs.
Strategies that focus solely on support and resistance see fewer complications in their risk management, as stop-losses can have a clear structure based on previous lows or highs of a particular trend.
Forex Bounce Strategy In this strategy, traders use short-term price charts to profit from the bounce of a specific benchmark, in many cases, a moving average. This strategy requires the trader to trade without intermissions and requires a traders’ full attention, as profits and losses are often fractional but high in volume.
Using the bouncing strategy, sharp trends in terms of price will trace back to the moving average and then bounce off that average. However, your profits are highly sensitive to price swings due to high volumes in this strategy. Therefore, it is advisable to avoid trading at the market openings like Monday morning due to potential news surprises.
Breakout Strategy A breakout is a price movement that swings past the moving average trend. Breakouts can happen in both bearish and bullish scenarios.
This strategy predicts volatility, making it easier to see opportunities among swing trading, which you can read about basic FX trading strategies in the article.
This strategy also focuses on support and resistance but utilizes unusual price movements to profit, such as price action trading.
The breakout suggests that unusual price movements, referred to as breakouts, result in retesting, after which the markets turn to the previous breakout side of the resistance level.
Overbought and Oversold This strategy focuses on looking at the fair value of a currency to figure out which currency is either overbought or oversold. An important metric to measure this is the RSI, a momentum indicator that analyzes the pace of price movement. Based on RSI, a trader can create assumptions about reliability and sustainability of value and the likeliness of these changes. Many traders use this strategy to rely less on technical analysis, which is more statistical.
Conclusion Although there is never a perfect trading strategy or a one-size-fits-all solution, it is crucial to try different approaches to learn which one fits your personal needs best. We believe these trading strategies will expand your current top forex trading strategies portfolio!