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Three of the Most Popular Forex Trading Strategies

Three of the Most Popular Forex Trading Strategies

There are loads of forex trading strategies, what works for you will heavily depend on your goals and your exposure to risk. For the most part, many of these different types of strategies are essentially the same with minor differences. 

As a result, we can broadly classify several of these forex trading strategies into the following three key strategies. For this article, we will focus on trend trading forex strategy, counter-trend trading strategy, and range trading forex strategy. 

What is trend trading forex strategy?

Out of all the forex trading strategies, trend trading is one of the most popular. This approach basically focused on the upward or downward trend in a currency price movement. 

Investors in the forex market choose trade entry and exit points that are based on the currency’s positioning and price within the trend. They also take into account the trend’s relative strength. 

Recent trends can usually be reliable indicators on which direction the price is likely to move. Some of the tools at the disposal of trend traders are as follows: 

  • Directional indices
  • Moving Averages
  • Relative strength indicators
  • Volume measurement
  • Stochastics 

On the other hand, counter-trend trading forex strategy involves employing trading concepts like corrections or divergences. As a result, it’s often considered to be an approach where high-risk positions are taken against a prevailing trend. 

This means that it’s not a good investment channel for novice traders as it will require a strong grasp on the concepts of price action, support and resistance, and divergence (which can be quite difficult to understand). 

What is range trading?

When it comes to the most popular forex trading strategies, range trading is high up on the list. This simple strategy is based on the idea that prices can often hold within a steady and predictable range over a particular period of time. 

This is evidenced in markets that are made up of stable and predictable economies. This also means that their currencies won’t be subject to surprise events. 

Range traders are known to quickly buy and sell at predictable highs and lows of resistance and support. They are also known to use some of the same tools employed by trend traders to identify opportunities to enter and exit trades. 

These forex trading tools include the following: 

  • Commodity channel index
  • Relative strength index
  • Stochastics 

Some of the other forex trading strategies are as follows: 

  • Breakout trading
  • Carry trading
  • Swing trading
  • Position trading
  • Pivot points trading
  • Reenactment strategies
  • Reversal trading