In Forex, it is difficult to achieve continuous results by trading in the dark. In order to continuously generate profits, it is important to always trade based on the rules you set for yourself, using appropriate trading techniques and rules. By setting rules, you can trade without being influenced by emotions and improve reproducibility.
In order to set up an appropriate trading technique for your rules, know the basic trading techniques and where to use them, and use them as a stepping stone to consistency in your own rules.
The forex market can be broadly divided into trending and ranging markets.
Although about 80% of the Forex market is said to be in a range, trading in a trending market is the most effective way to earn large profits
Therefore, let’s learn the basic trading techniques in a trending market.
Forward Trend is a method of entering the market in accordance with the direction of the trend. For example, in an uptrend, you buy entry in anticipation of a further rise. On the other hand, in a downtrend, you enter the market by selling.
In forward tension, you can increase your profits by entering the market in the early stages of a trend. It is also important to determine how long the trend will continue. At the same time, you need to be careful of ” damashi,” which is the reversal of a trend after it appears to be developing, and of price movements after a trend change.
Gyakutenshiki is a method of making an entry that goes against the current trend. However, it is not simply the opposite of the forward trend. While the forward trend is entered to follow the trend, the reverse trend is a trading technique that aims for a trend reversal.
For example, when an uptrend ends, the price will basically go down, so the idea of contrarian trading is to predict the end of the uptrend and make a sell entry.
If you can successfully identify a trend reversal and make a reverse entry, you will have entered the market in the early stage of the next trend, and you can aim for a large profit. Therefore, it is recommended to use stop-loss rules as well.
Forex trading techniques are broadly classified into four categories according to the length of time a position is held. It is advisable to choose the method that best suits your personality and lifestyle, taking into consideration your investment style and investment efficiency.
Scalping is a trading method in which new orders are placed and closed several times a day. Scalping involves accumulating small gains or losses of a few pips to a few dozen pips in a short period of time, and although the gains or losses per trade are small, if you can increase your win rate, you can aim for a large total profit. Since dozens of trades are made in a day, the ability to quickly assess the timing of trades and make decisions to trade is important.
Day trading is a trading method in which orders are placed and trades are closed during the day. Since positions are not held across days, swaps are not generated. The time it takes to hold a position can range from a few minutes to a day, and since the price fluctuations are larger than those of scalping, the profit/loss tends to be larger as a result. Since positions are closed during the day, there is no risk due to fluctuations at the next day’s market open.
Swing trading is a trading method in which the entire process from order placement to settlement takes place over a period of several days to several weeks; the FX market is said to have certain periodic waves, and swing trading aims to profit from these waves. Swing trading is also suitable for those who are not able to view the charts during the daytime. However, please note that when the chart suddenly changes due to economic indicators, interest rate policy announcements, or statements by key figures, the pattern may be different from the usual wave.
A position trade is a trading technique in which a position is held for several months or years. The aim is to profit from the large settlement and daily swaps. Swing trading requires little chart watching, but it is a relatively difficult trading technique for beginners because it mainly requires fundamental analysis before entry and requires entry based on a strategy.
Trading methods are used according to one’s market conditions, lifestyle, and investment strategy. Be sure to choose the right method to execute your rules.
Are you aware of your position holding times in Forex? There are several things to keep in mind about holding times. It is one of the items that should be checked in the back testing of a system trade.