Understandings forex trading Strategies: A guide for all South African traders

By: Chime Amara

Whenever a trader decides to buy or sell any currency pair in the market, it is always important to consider the reason for making such a decision. Often the trader finds himself asking the question: what pairs am I going to trade today？ Am I going to buy or sell it？ What is my take-profit target？ What is the correct stop loss to use？ Which lotsize am I to use in buying or selling this pair？ etc.

Often the answers to the above questions constitute the trader's trading strategy. Without developing a good trading strategy, the trader can have himself asking these questions indefinitely without ever getting any answers to them. We have therefore discussed some Forex trading strategies to assist the trader in making such decisions.

What is a forex trading strategy？

Forex Trading Strategies are important trading techniques developed by forex traders to guide them in making decisions on when to buy or sell in the market. Often various forex trading strategies are designed using fundamental and technical analysis. The forex trading strategies employed by a trader guides him on when to enter the market, his exit points, choice of stop loss and take profits target, etc.

How to choose a forex trading strategy

Forex Trading strategies are usually developed based on price actions. Here the trader proceeds by observing how the market has moved in the past and uses it to predict future market movements. This guides him on choosing a strategy to use in buying and selling.

Forex trading Strategies recommended for South African traders

There are many forex trading strategies available for the South African traders to make decisions on which is best for them. This will assist him in making decisions on when to enter and exit the market. We have discussed them below:

Price action trading: Trading price actions involves studying market reactions at various levels. Here the trader needs to mark the support and resistance levels and the market's reaction at these points to assist him in taking decisions on whether to buy or sell. Often price action traders place their buy orders at the demand zones (support) in the hope of selling them at the next resistance level.

Breakout strategy: The breakout out strategy involves taking positions when the market breaks out of a certain level it has traded for a long time. Often the best time to join the new trend is after a retest of the previous level from which the market has just broken out.

Trend trading strategy: There are two major market trends known as an upward and downward trend. Each trend is known to last for two to three months or more. Traders tend to identify the market trend at the earliest stage and take positions based on the market direction.

Position Trading: Position trading is important trading used by investors who do not have time to make daily decisions. They analyze the market and predict the monthly market trend and take positions based on such predictions.

Day trading strategy: Day traders often predicted the predominant trend for the day and take positions early. Day traders predict the market using the 24hrs timeframe.

Scalping strategy: Often scalpers tend to make the most profit from the market than other groups of traders. This is because they tried to predict the short-term market trend and take decisions based on them. Often scalpers are known to open and close multiple positions within the day.

Swing trading: Swing traders are those traders who hold their trades for more than a day but less than a month. This set of traders often waited for the market to hit their set target before closing them, hence they leave their position open for two to three days or more