What is a Forex trading strategy?

Ideally, a Forex trading strategy is a formula upon which traders base their decisions on whether to buy (call) or sell (put) a currency pair at a particular time. Typically, there is no one best strategy, though over time and through experience, you get to know what works best for you as a trader.

 Most of the forex traders who have understood the ropes of the game prefer to work around a particular strategy and perfect with time. The rule of the game is to try out several strategies, select one that fits your needs. Forex trading strategies is a game of trial and error; none of the strategies is one-size-fits-all. Make things happen.

Forex Trading Strategies

Here are some of the best Forex trading strategies which top the list of most successful traders; Bladerunner trade; Daily Fibonacci Pivot trade; Bolly band bounce trade; Forex Overlapping Fibonacci; The Pop "n" Stop trade; Trading the Forex Fractal; Scalping; and Positional trading

What to consider when choosing a strategy

Several factors come into play in deciding the best strategy to apply in trading. Below we have outlined some factors to consider while choosing a Forex trading strategy: -

·         Selecting the market

As a trader, it is prudent to know and understand the currency pairs you want to trade with and become an expert in interpreting the currency pairs.

·         Position sizing

A trader needs to evaluate the position size to determine each trade's risk factor.

·         Entry points

As a trader, you need to device rules for when to buy or enter a long or sell or short position based on the value prospects for the base currency.

·         Exit point

Equally, having an exit plan on when to make an exit on the long or short position.

When to Change a strategy

However, it is worthy to note that a strategy is only as good if the trader follows the game's rules. FX strategies are dynamic; the strategy that worked for you yesterday may not yield the same results today. Ideally, what this calls for is a change in your strategy. However, some factors ought to be considered in determining whether it is the right time to make that drastic change: -

·         Matching risk management with trading style – You know it's time for a strategy change when the ratio of risk involved versus the reward to be gained is not adding up, then you know it's time to shift gears to a different strategy.

·         Market conditions evolve – Some trading strategies are built on the premises of defined market trends. If the current market trends change, then it is without a doubt the strategy becomes ineffective, prompting the need for strategic change

    Comprehension – For a particular strategy to be effective, the trader needs to understand and comprehend the game's rules fully. Failure to fully comprehend the strategy rules may prove ineffective, hence the need for a change.  

EsEssentially change is inevitable, though switching a trading strategy many times, you stand at risk of losing out.