Simple Forex Trading Strategies That Work

Traders devote a good amount of time and effort seeking Forex trading strategies that give them an edge over other traders in the market.

Without Forex trading strategies, currency speculation amounts to nothing more than gambling, with one critical distinction: all gambling, whether on casino games, sporting events or lotteries, has a finite endpoint. Forex trading, on the other hand, has an indefinite endpoint determined only by the trader and the amount of funds in the trader’s account.

Forex trading strategies represent attempts to provide logic to the random price movements of currency markets that are completely random in nature. Forex trading strategies also provide checks and balances to trader emotions.

What Are The Best Forex Trading Strategies?

The best Forex trading strategies are those that fit the personality and trading equity of the trader. Here are some examples of basic Forex trading strategies that can be adapted to various trader temperaments and account sizes.

Forex Trading Strategies

Bottom fishing is a Forex trading strategy of purchasing in a downtrend and adding to that position as the market continues to trend down in an attempt to find that point in the trend where the market reverses and begins to form an uptrend. The key to employing this strategy is to size the purchases appropriately. No one can predict with absolute certainty when the market will reverse, so you want to leave room in your account to accommodate the drawdowns this strategy presents. It is also necessary to permit yourself the right to be wrong and abandon the strategy if the trend moves against you and the drawdown represents more than 20% of your trading equity.

Simple Forex Trading Strategies

Another simple Forex trading strategy involves using the fact that different currency pairs will either duplicate each other’s price action or move in the opposite direction.

For an example of this strategy, consider the EUR/USD and the USD/CHF. These two pairs are considered to be negatively correlated, meaning that when one rises, the other falls. The tactic traders’ employ for taking advantage of this relationship is to buy or sell both pairs simultaneously, knowing that if one is losing money, the other should be making money. The key with this strategy is to realize and accept that the negative correlation between the two pairs is not perfect, meaning that there will be occasions when the two pairs will in price together, rather than moving in opposition.

These two Forex trading strategies can be adapted for many different currency pairs and various market conditions. They can also be adapted to fit the individual trader and his/her trading preferences.