There are many different types of Forex trading strategies as you probably know by now. However, many traders have trouble deciding which Forex trading strategy is best for them to use. So, here is an overview of some of the more popular strategies that you can use to trade the Forex market with, as well as some of their advantages and disadvantages.
Traditional Forex Trading Strategies
Traditional Forex trading strategies include all strategies or systems that involve taking either a straight buy or sell position in the market. If you don’t fully understand the Forex market yet, you should first make sure you can answer the question “what is forex trading?” before you move on to actually learning how to trade. Many traders make this mistake of not learning the basics first, and it’s a very costly mistake to make. There are basically three major classifications of traditional Forex trading strategies that traders can use to trade the Forex markets with:
Software trading systems – Often referred to as “robot” trading systems, these computer software trading systems are usually 100% mechanical in nature and leave little to no room for human discretion. Good in theory, but in reality the markets are too dynamic and diverse to be mechanized effectively over the long-run.
Indicator trading systems – Indicators are simply derivates of the raw price action of a market that show the price movement in a different format. Some indicators like moving averages and a couple others are useful, but in and of themselves, most indicators are simply more confusing than anything else.
Classic technical analysis trading strategies – Classical technical chart-reading involves making use of the price bars and the levels they create on a chart. Nothing fancy; just simple price patters and support and resistance trading. This approach is the most logical and typically the most effective when used with a developed discretionary trading sense.
If you are totally new to Forex trading and want to get a thorough explanation of all the basics of Forex and Forex trading strategies, check out this free beginners forex trading course.
Forex Binary Option Trading
Many traders become intrigued with the possibilities of trading Forex with binary options strategies, and rightly so, binary options are a relatively new and very exciting way to trade the Forex market. Whereas with traditional Forex trading strategies the trader must manage the position and decide when to close the trade out, when you employ forex binary options you only need to be right about the direction of the market when the option expires. If you pick the direction correctly when your binary option expires, you make money, if you are wrong you lose only the money you paid to buy the option. There are call binary options and put binary options. If you think the market will be higher than the current prices at the expiration of the binary options, then you buy a binary call, if you think it will be lower at expiration then you buy a binary put option.