Advices on forex trading can be easily found online with numerous information readily available on how to gain profit in trading currencies. However, not all of the published strategies necessarily work in real life.
Here are the top three forex trading strategies that professional forex traders often use to acquire profit.
Trading After Major Market Announcements
One of the best ways to gain profit is to trade when there are better-than-expected or worse-than-expected economic data announcements. Market movements can be predictable since they tend to move sharply due to the latest reports. This will allow you to make relatively easy money in forex trading.
When trading during major market announcements, it's important to remember to keep stop-losses in place, but not too tight, since there are chances of higher volatility after economic data announcements.
The only flaw of this strategy is that you can only execute it on days when the announcements are made. Nevertheless, on a day when the figures turn out to be surprising, it can be very profitable.
Using Big Round Numbers
Set up alerts for major currency pairs when prices move near the so-called ‘big round numbers’. Big round numbers refer to figures like 1.50 in GBP/USD or 1.00 in the EUR/USD. They are acknowledged as physiological trading levels which can be used to set target prices or stop-loss levels.
Combining Technical Indicators
When using chart analysis tools like technical indicators, do not stay with just one indicator when making trading decisions. The key to successfully trade in forex markets is using several indicators in combination with each other.
Good technical indicators to use for trading strategies are the MACD (Moving Average Convergence Divergence), the RSI (Relative Strength Index), Bollinger Bands and ROC (Rate of Change). Combining all these will allow you to measure price movements based on trend, momentum, volatility and volume.
The best way to utilize these indicators is to trade when 4 out of the 4 say buy (or sell), then you buy (or sell). This implies a strong trading signal. If 2 or less of the indicators say you should execute a trade, then it's better to leave it since the trading signal is not strong enough.