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Types of Trading Strategies a Beginner Could Adopt
Since online trading had become so popular in recent years, more and more people without a previous economic or financial background had been drawn into this industry.
We want to focus particularly on binary options trading. For those of you who are not familiar with this topic, check out one of our previous articles to see the differences between binary options and forex.
Categories of trading strategies
There are two major types of strategies that beginners usually adopt when trading binary options:
- Betting type trading strategies – these strategies assume that the trader will try to apply in trading some betting strategies. One of the betting strategies that is usually chosen is martingale and we’ll talk about it in greater detail in a future material. Also, traders are using betting strategies combined with the economic calendar since they are trying to exploit the volatility that is generated around important events.
- Market behavior strategies – in these strategies, traders rely on technical and statistical data, trying to understand why a certain market behaves in a certain way and also understanding the order flow behind any particular move. These strategies take more time to master, but if you are willing to build a career out of online trading, these are the ones that professional use so you should use them as well.
Although betting type strategies can be effective, there are some negative aspects of them. Trading requires a certain degree of objectivity and by choosing a market behavior strategy you will be able to remove those subjective views over the market, since you’ll have a clear set of rules that will help you understand how the market is trading and when you should put on a trade.
Discipline is other important aspect, with regards to the implementation of a trading strategy, but we’ll cover that topic in detail in other material.
To sum up, we tried to show you what kind of trading strategies you can adopt of binary options trading and we suggested that market behavior strategies are more suitable if you want to trade in a professional way.
Day trading strategies are essential when you are looking to capitalise on frequent, small price movements. A consistent, effective strategy relies on in-depth technical analysis, utilising charts, indicators and patterns to predict future price movements. This page will give you a thorough break down of beginners trading strategies, working all the way up to advanced , automated and even asset-specific strategies.
It will also outline some regional differences to be aware of, as well as pointing you in the direction of some useful resources. Ultimately though, you’ll need to find a day trading strategy that suits your specific trading style and requirements.
Also, ensure your choice of broker suits strategy based day trading. You will want things like;
- Excellent trade execution speed,
- Price action data ( + Level 2 if possible)
- Ability to trade direct from graphs,
- Trade automation,
- Stop losses and take profit orders
- Etc etc.
Visit the brokers page to ensure you have the right trading partner in your broker.
Top 3 Brokers Suited To Strategy Based Trading
Trading Strategies for Beginners
Before you get bogged down in a complex world of highly technical indicators, focus on the basics of a simple day trading strategy. Many make the mistake of thinking you need a highly complicated strategy to succeed intraday, but often the more straightforward, the more effective.
Incorporate the invaluable elements below into your strategy.
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- Money management – Before you start, sit down and decide how much you’re willing to risk. Bear in mind most successful traders won’t put more than 2% of their capital on the line per trade. You have to prepare yourself for some losses if you want to be around when the wins start rolling in.
- Time management – Don’t expect to make a fortune if you only allocate an hour or two a day to trading. You need to constantly monitor the markets and be on the lookout for trade opportunities.
- Start small – Whilst you’re finding your feet, stick to a maximum of three stocks during a single day. It’s better to get really good at a few than to be average and making no money on loads.
- Education – Understanding market intricacies isn’t enough, you also need to stay informed. Make sure you stay up to date with market news and any events that will impact your asset, such as a shift in economic policy. You can find a wealth of online financial and business resources that will keep you in the know.
- Consistency – It’s harder than it looks to keep emotions at bay when you’re five coffees in and you’ve been staring at the screen for hours. You need to let maths, logic and your strategy guide you, not nerves, fear, or greed.
- Timing – The market will get volatile when it opens each day and while experienced day traders may be able to read the patterns and profit, you should bide your time. So hold back for the first 15 minutes, you’ve still got hours ahead.
- Demo Account – A must-have tool for any beginner, but also the best place to backtest or experiment with new, or refined, strategies for advanced traders. Many demo accounts are unlimited, so not time restricted.
Components Every Strategy Needs
Whether you’re after automated day trading strategies, or beginner and advanced tactics, you’ll need to take into account three essential components; volatility, liquidity and volume. If you’re to make money on tiny price movements, choosing the right stock is vital. These three elements will help you make that decision.
- Liquidity – This enables you to swiftly enter and exit trades at an attractive and stable price. Liquid commodity strategies, for example, will focus on gold, crude oil and natural gas.
- Volatility – This tells you your potential profit range. The greater the volatility, the greater profit or loss you may make. The cryptocurrency market is one such example well known for high volatility.
- Volume – This measurement will tell you how many times the stock/asset has been traded within a set period of time. For day traders, this is better known as ‘average daily trading volume.’ High volume tells you there’s significant interest in the asset or security. An increase in volume is frequently an indicator a price jump either up or down, is fast approaching.
5 Day Trading Strategies
Breakout strategies centre around when the price clears a specified level on your chart, with increased volume. The breakout trader enters into a long position after the asset or security breaks above resistance. Alternatively, you enter a short position once the stock breaks below support.
After an asset or security trades beyond the specified price barrier, volatility usually increases and prices will often trend in the direction of the breakout.
You need to find the right instrument to trade. When doing this bear in mind the asset’s support and resistance levels. The more frequently the price has hit these points, the more validated and important they become.
This part is nice and straightforward. Prices set to close and above resistance levels require a bearish position. Prices set to close and below a support level need a bullish position.
Plan your exits
Use the asset’s recent performance to establish a reasonable price target. Using chart patterns will make this process even more accurate. You can calculate the average recent price swings to create a target. If the average price swing has been 3 points over the last several price swings, this would be a sensible target. Once you’ve reached that goal you can exit the trade and enjoy the profit.
One of the most popular strategies is scalping. It’s particularly popular in the forex market, and it looks to capitalise on minute price changes. The driving force is quantity. You will look to sell as soon as the trade becomes profitable. This is a fast-paced and exciting way to trade, but it can be risky. You need a high trading probability to even out the low risk vs reward ratio.
Be on the lookout for volatile instruments, attractive liquidity and be hot on timing. You can’t wait for the market, you need to close losing trades as soon as possible.
Popular amongst trading strategies for beginners, this strategy revolves around acting on news sources and identifying substantial trending moves with the support of high volume. There is always at least one stock that moves around 20-30% each day, so there’s ample opportunity. You simply hold onto your position until you see signs of reversal and then get out.
Alternatively, you can fade the price drop. This way round your price target is as soon as volume starts to diminish.
This strategy is simple and effective if used correctly. However, you must ensure you’re aware of upcoming news and earnings announcements. Just a few seconds on each trade will make all the difference to your end of day profits.
Although hotly debated and potentially dangerous when used by beginners, reverse trading is used all over the world. It’s also known as trend trading, pull back trending and a mean reversion strategy.
This strategy defies basic logic as you aim to trade against the trend. You need to be able to accurately identify possible pullbacks, plus predict their strength. To do this effectively you need in-depth market knowledge and experience.
The ‘daily pivot’ strategy is considered a unique case of reverse trading, as it centres on buying and selling the daily low and high pullbacks/reverse.
5. Using Pivot Points
A day trading pivot point strategy can be fantastic for identifying and acting on critical support and/or resistance levels. It is particularly useful in the forex market. In addition, it can be used by range-bound traders to identify points of entry, while trend and breakout traders can use pivot points to locate key levels that need to break for a move to count as a breakout.
Calculating Pivot Points
A pivot point is defined as a point of rotation. You use the prices of the previous day’s high and low, plus the closing price of a security to calculate the pivot point.
Note that if you calculate a pivot point using price information from a relatively short time frame, accuracy is often reduced.
So, how do you calculate a pivot point?
- Central Pivot Point (P) = (High + Low + Close) / 3
You can then calculate support and resistance levels using the pivot point. To do that you will need to use the following formulas:
- First Resistance (R1) = (2*P) – Low
- First Support (S1) = (2*P) – High
The second level of support and resistance is then calculated as follows:
- Second Resistance (R2) = P + (R1-S1)
- Second Support (S2) = P – (R1- S1)
When applied to the FX market, for example, you will find the trading range for the session often takes place between the pivot point and the first support and resistance levels. This is because a high number of traders play this range.
It’s also worth noting, this is one of the systems & methods that can be applied to indexes too. For example, it can help form an effective S&P day trading strategy.
Limit Your Losses
This is particularly important if you’re using margin. Requirements for which are usually high for day traders. When you trade on margin you are increasingly vulnerable to sharp price movements. Yes, this means the potential for greater profit, but it also means the possibility of significant losses. Fortunately, you can employ stop-losses.
The stop-loss controls your risk for you. In a short position, you can place a stop-loss above a recent high, for long positions you can place it below a recent low. You can also make it dependant on volatility.
For example, a stock price moves by £0.05 a minute, so you place a stop-loss £0.15 away from your entry order, allowing it to swing (hopefully in the expected direction).
One popular strategy is to set up two stop-losses. Firstly, you place a physical stop-loss order at a specific price level. This will be the most capital you can afford to lose. Secondly, you create a mental stop-loss. Place this at the point your entry criteria are breached. So if the trade makes an unanticipated turn, you’ll make a swift exit.
Forex Trading Strategies
Forex strategies are risky by nature as you need to accumulate your profits in a short space of time. You can apply any of the strategies above to the forex market, or you can see our forex page for detailed strategy examples.
Cryptocurrency Trading Strategies
The exciting and unpredictable cryptocurrency market offers plenty of opportunities for the switched on day trader. You don’t need to understand the complex technical makeup of bitcoin or ethereum, nor do you need to hold a long-term view on their viability. Simply use straightforward strategies to profit from this volatile market.
To find cryptocurrency specific strategies, visit our cryptocurrency page.
Stock Trading Strategies
Day trading strategies for stocks rely on many of the same principles outlined throughout this page, and you can use many of the strategies outlined above. Below though is a specific strategy you can apply to the stock market.
Moving Average Crossover
You will need three moving average lines:
- One set at 20 periods – This is your fast moving average
- One set at 60 periods – This is your slow moving average
- One set at 100 periods – This is your trend indicator
This is one of the moving averages strategies that generates a buy signal when the fast moving average crosses up and over the slow moving average. A sell signal is generated simply when the fast moving average crosses below the slow moving average.
So, You’ll open a position when the moving average line crosses in one direction and you’ll close the position when it crosses back the opposite way.
How can you establish there’s definitely a trend? You know the trend is on if the price bar stays above or below the 100-period line.
For more information on stocks strategies, see our Stocks and shares page.
Spread Betting Strategies
Spread betting allows you to speculate on a huge number of global markets without ever actually owning the asset. Plus, strategies are relatively straightforward.
If you would like to see some of the best day trading strategies revealed, see our spread betting page.
Developing an effective day trading strategy can be complicated. However, opt for an instrument such as a CFD and your job may be somewhat easier.
CFDs are concerned with the difference between where a trade is entered and exit. Recent years have seen their popularity surge. This is because you can profit when the underlying asset moves in relation to the position taken, without ever having to own the underlying asset.
For CFD specific day trading tips and strategies, see our CFD page.
Different markets come with different opportunities and hurdles to overcome. Day trading strategies for the Indian market may not be as effective when you apply them in Australia. For example, some countries may be distrusting of the news, so the market may not react in the same way as you’d expect them to back home.
Regulations are another factor to consider. Indian strategies may be tailor-made to fit within specific rules, such as high minimum equity balances in margin accounts. So, get online and check obscure regulations won’t impact your strategy before you put your hard earned money on the line.
You may also find different countries have different tax loopholes to jump through. If you’re based in the West but want to apply your normal day trading strategies in the Philippines, you need to do your homework first.
What type of tax will you have to pay? Will you have to pay it abroad and/or domestically? Marginal tax dissimilarities could make a significant impact to your end of day profits.
Strategies that work take risk into account. If you don’t manage risk, you’ll lose more than you can afford and be out of the game before you know it. This is why you should always utilise a stop-loss.
The price may look like it’s moving in the direction you hoped, but it could reverse at any time. A stop-loss will control that risk. You’ll exit the trade and only incur a minimal loss if the asset or security doesn’t come through.
Savvy traders don’t usually risk more than 1% of their account balance on a single trade. So if you have £27,500 in your account, you can risk up to £275 per trade.
It will also enable you to select the perfect position size. Position size is the number of shares taken on a single trade. Take the difference between your entry and stop-loss prices. For example, if your entry point is £12 and your stop-loss is £11.80, then your risk is £0.20 per share.
Now to figure out how many trades you can take on a single trade, divide £275 by £0.20. You can take a position size of up to 1,375 shares. That is the maximum position you could take to stick to your 1% risk limit.
Also, check there is sufficient volume in the stock/asset to absorb the position size you use. In addition, keep in mind that if you take a position size too big for the market, you could encounter slippage on your entry and stop-loss.
Everyone learns in different ways. For example, some will find day trading strategies videos most useful. This is why a number of brokers now offer numerous types of day trading strategies in easy-to-follow training videos. Head to their learning and resources section to see what’s on offer.
If you’re looking for the best day trading strategies that work, sometimes online blogs are the place to go. Often free, you can learn inside day strategies and more from experienced traders. On top of that, blogs are often a great source of inspiration.
Some people will learn best from forums. This is because you can comment and ask questions. Plus, you often find day trading methods so easy anyone can use. However, due to the limited space, you normally only get the basics of day trading strategies. So, if you are looking for more in-depth techniques, you may want to consider an alternative learning tool.
If you want a detailed list of the best day trading strategies, PDFs are often a fantastic place to go. Their first benefit is that they are easy to follow. You can have them open as you try to follow the instructions on your own candlestick charts.
Another benefit is how easy they are to find. For example, you can find a day trading strategies using price action patterns PDF download with a quick google. They can also be very specific. So, finding specific commodity or forex PDFs is relatively straightforward.
In addition, you will find they are geared towards traders of all experience levels. Hence you can find for beginners PDFs and advanced PDFs. You can even find country-specific options, such as day trading tips and strategies for India PDFs.
Having said that, a PDF simply won’t go into the level of detail that many books will. The books below offer detailed examples of intraday strategies. Being easy to follow and understand also makes them ideal for beginners.
- The Simple Strategy – A Powerful Day Trading Strategy For Trading Futures, Stocks, ETFs and Forex, Mark Hodge
- How to Day Trade: A Detailed Guide to Day Trading Strategies, Risk Management, and Trader Psychology, Ross Cameron
- Intra-Day Trading Strategies: Proven Steps to Trading Profits, Jeff Cooper
- The Complete Guide to Day Trading: A Practical Manual from a Professional Day Trading Coach, Markus Heitkoetter
- Stock Trading Wizard: Advanced Short-Term Trading Strategies, Tony Oz
So, day trading strategies books and ebooks could seriously help enhance your trade performance. If you would like more top reads, see our books page.
Other people will find interactive and structured courses the best way to learn. Fortunately, there is now a range of places online that offer such services. You can find courses on day trading strategies for commodities, where you could be walked through a crude oil strategy. Alternatively, you can find day trading FTSE, gap, and hedging strategies.
Trading For A Living
If you’re looking to pack up the day job and start day trading for a living, then you’ve got a challenging but exciting journey ahead of you. You’ll need to wrap your head around advanced strategies, as well as effective risk and money management strategies. Discipline and a firm grasp on your emotions are essential.
For more information, visit our ‘trading for a living‘ page.
Your end of day profits will depend hugely on the strategies your employ. So, it’s worth keeping in mind that it’s often the straightforward strategy that proves successful, regardless of whether you’re interested in gold or the NSE.
Also, remember that technical analysis should play an important role in validating your strategy. In addition, even if you opt for early entry or end of day trading strategies, controlling your risk is essential if you want to still have cash in the bank at the end of the week. Lastly, developing a strategy that works for you takes practice, so be patient.
5 Types of Forex Trading Strategies That Work
Last Updated on March 10, 2020
Do you feel lost trying to figure which Forex trading strategies to use?
Should you be a day trader, swing trader, position trader, news trader, scalper, or a combination of different forex trading strategies?
It can be frustrating, right?
Because you’ve seen traders make money with different forex trading strategies.
When you attempt it, it fails you. @^*@^#@*#!!
Because in today’s post, I’ll share with you 5 types of Forex trading strategies that work and how to find the best one that suits you.
Then let’s begin…
Forex trading strategies that work #1 — Position trading
Position trading is a longer-term trading approach where you can hold trades for weeks or even months.
The timeframes you’ll trade on are usually the Daily or Weekly.
As a position trader, you mainly rely on fundamental analysis in your trading (like NFP, GDP, Retail sales, and etc.) to give a bias.
Also, you might use technical analysis to better time your entries.
You analyze the fundamentals of EUR/USD and determine it’s bullish. But, you don’t want to go long at any price.
So, you wait for EUR/USD to come to Support before taking your position.
Now if your analysis is correct, you could enter at the start of a new trend before anyone else.
Now, let’s discuss the pros and cons of position trading…
- Don’t need to spend much time trading because your trades are longer-term
- Less stress in your trading as you’re not concerned with the short-term price fluctuations
- A favorable risk to reward on your trades (possibly 1 to 5 or more)
- Require a firm understanding of fundamentals driving the market
- Need a larger capital base because your stop loss is wide
- May not make a profit every year because of the low number of trades
There’s a trading strategy called Trend Following (which is similar to position trading).
The only difference is Trend Following is purely a technical approach that doesn’t use any fundamentals.
Forex trading strategies that work #2 — Swing trading
Swing trading is a medium-term trading strategy where you can hold trades for days or even weeks.
The timeframes you’ll trade on are usually the 1-hour or 4-hour.
As a swing trader, your concern is to capture “a single move” in the market (otherwise called a swing).
So you’ll likely:
- Buy Support
- Sell Resistance
- Trade breakouts
- Trade pullbacks
- Trade the bounce of the moving average
Thus, it’s important to learn technical concepts like Support & Resistance, candlestick patterns, and moving average.
Here’s an example of swing trading on USD/JPY:
Now, let’s discuss the pros and cons of swing trading…
- Don’t have to quit your full-time job to be a swing trader
- It’s possible to be profitable every year because you have more trading opportunities
- Won’t be able to ride big trends
- Have overnight risk
Now, if you want to learn more about swing trading, then The Complete Guide to Finding High Probability Trading Strategy will help immensely.
Forex trading strategies that work #3 — Day trading
Day trading a short-term trading strategy where you’ll hold your trades for minutes or even hours (it’s similar to swing trading but at a “faster” pace).
The timeframes you’ll trade on are usually the 5mins or 15mins.
As a day trader, your concern is to capture the intraday volatility.
This means you must trade the most volatile session of your instrument because that’s where the money is made.
So, you’ll likely:
- Buy Support
- Sell Resistance
- Trade breakouts
- Trade pullbacks
- Trade the bounce of the moving average
If you’re a day trader, you won’t be concerned with the fundamentals of the economy or the long-term trend because it’s irrelevant.
Instead, you’ll identify your bias for the day (whether to be long or short) and trade that direction for the session.
Below is the chart of USDCAD (4-hour timeframe) at 1.2900 Resistance.
If the price can’t break above it, chances are, today will be a “down” day.
On the 15-minute timeframe, you noticed a Shooting Star has formed which signals selling pressure.
You can take a short trade with possible target profit at Support (blue box).
Here’s what I mean:
Now, let’s discuss the pros and cons of day trading…
- If you’re good, you can make money on most months
- No overnight risk because you close your positions by the end of the day
- It’s stressful as you’re constantly watching the markets
- Can lose a lot more than intended if you suffer massive slippage (from Black Swan events)
- Huge opportunity cost as you could be earning a full-time salary elsewhere
Now if day trading is still too “slow” for you, then the next forex trading strategy might suit you…
Forex trading strategies that work #4 — Scalping
I don’t recommend scalping for the retail traders because the transaction cost will eat up most of your profits.
And you’re slower than the machines which put you at a major disadvantage.
Still, if you want to learn more, then read on…
Scalping is a very short-term strategy where you’ll hold trades minutes or even seconds.
As a scalper, your concern with what the market is doing now and how you can take advantage of it.
The main tool you’ll use to trade is order flow (which shows you the buy and sell orders in the market).
Now, let’s discuss the pros and cons of scalping…
- Have lots of trading opportunities each day
- Can make a healthy income from trading
- High financial cost (paying your software, newsfeed, connection, and etc.)
- Glued to the screen for many hours a day
- It’s a highly stressful endeavor
If you want to be a scalper, I recommend you join a proprietary trading firm because they will provide the tools to help you with it.
Forex trading strategies that work #5 — Transition trading
You’ve probably never heard of this before because I came up with it.
Back while I was in proprietary trading, one of the “interesting” things I learned was transition trading.
You’re probably wondering:
“What is transition trading?”
Well, the idea is to enter a trade on the lower timeframe, and if the market moves in your favor, you can increase your target profit or trail your stop loss on the higher timeframe.
Here’s an example:
Let’s say you traded the breakout on GBP/JPY 1-hour timeframe and the price quickly went in your favor.
You noticed the 4-hour timeframe respecting the 20MA.
So instead of taking profits, you trail your stop loss using the 20MA hoping to ride a bigger move.
And if you’re wrong, you’ll exit your trade when the price closes below the 20MA.
Now, there are variations of transition trading.
But the main idea is this:
- Find an entry on the lower timeframe
- If the price moves in your favor, consider planning your exits on the higher timeframe
Now, let’s discuss the pros and cons of transition trading…
- Can get an insane risk to reward (possibly 1 to 10 or more)
- Can lower your risk as your entry is on the lower timeframe
- Only a handful of your trades will lead to monster winners
- Must understand multiple timeframes really well
Now that you have an idea of the different forex trading strategies out there.
The next question is…
Which Forex trading strategies suit you best?
Here’s the thing:
I’ve seen traders wasting many years on trading strategies that don’t suit them (right from the start).
If ONLY they considered these 3 things I’m about to share with you…
…they could have saved years of frustrations, money, time, and effort.
And, I don’t want you to be one of them.
So before you attempt to trade any forex trading strategies, you MUST consider these 3 questions…
1. Do you want to grow your wealth or make an income from trading?
First, let’s define what’s income and wealth.
Income = Make X dollars a month
Wealth = Grow X % a year
If you make an income from trading, you must find more trading opportunities within a shorter time period (for the law of large number to play out).
This means you must trade the lower timeframes and spend more hours in front of the screen.
The Forex trading strategies you can use are scalping, day trading, or short-term swing trading.
If you want to grow your wealth from trading, you can afford to have fewer trading opportunities.
This means you can trade the higher timeframes and spend fewer hours in front of the screen.
The trading strategies you can use are swing trading or position trading.
2. How much time can you devote to trading?
This is a no-brainer.
But I’ve included it because I’ve seen traders who can’t think logically (not you of course).
So here’s the deal:
If you have a full-time job, or you can’t afford to spend 12 hours a day in front of your monitor, then don’t try scalping or day trading (it’s silly).
Instead, go with swing or position trading.
But, if you have all the time in the world and enjoy short-term trading, by all means, go ahead.
3. Does this Forex trading strategy suit you?
Here’s the breakdown:
Most trading strategies will fall into 1 of 2 categories:
- A high win rate with low reward to risk
- A low win rate with high reward to risk
So, which approach is better?
Well, in terms of profitability both approaches can work because it depends on your win rate and risk to reward ratio.
So a better question would be…
“Which approach are you more comfortable with?”
If you prefer a higher winning rate but smaller gains, then go for swing trading.
If you prefer a lower winning rate but larger gains, then go for position trading.
Forex trading strategies for beginners, how to get started…
Now if you’re new to Forex trading, you can get overwhelmed with the sheer number of trading strategies out there.
You’ve got stuff like trading indicators, chart patterns, Elliot Waves, etc.
Where do you start?
My suggestion is to master Support and Resistance and here’s why…
Because if you think about this, the price can only do one of two things:
- It reverses at Support and Resistance
- It breaks Support and Resistance
This means if you understand Support and Resistance, you have the ability to be a trend trader, breakout trader, or even a reversal trader.
It works on different timeframes whether you’re day trading, swing trading or even position trading.
So here’s how to get started…
1. Learn how to draw Support and Resistance
I show you how to do it step by step in this training below…
2. Learn how the price reacts at Support and Resistance (SR)
When the price breaks SR, ask yourself:
What’s the pattern that occurred before the breakout?
When the price reverses at SR, ask yourself:
What’s the pattern that occurred before the reversal?
After studying thousands of charts, you’ll have a 6th sense of whether the price is likely to break or reverse at SR
3. Define your trading timeframe
Next, commit to a timeframe you can trade comfortably.
If you have a full-time job, it doesn’t make sense to trade the 5mins timeframe because you don’t have the time for it.
Instead, you’re better off trading the higher timeframes (like 4-hour and above) as it requires less screen time.
So, be honest with yourself and decide on a timeframe that suits you best.
4. Develop a trading plan
Once you know your trading strategy and timeframe, you can develop a trading plan for it.
If you want to learn how to do it, go study this post below…
Here’s a recap of the different forex trading strategies that work:
Position trading: A wealth-building approach for those who can’t spend the whole day in front of the screen
Swing trading: A wealth or income building approach for those who can spend a few hours each day trading
Day trading and scalping: An income-generating approach for those who can spend the whole day in front of the screen
Before you learn any forex trading strategies, you must consider…
- Your trading goals
- Your time available
- Whether the strategy fits your personality
Now here’s what I’d like to know…
Which forex trading strategies do you use?
Let me know your thoughts in the comments below.
You are just great…!
I prefer the Swing Trading approach as I normally look at the 4 hourly and daily chart. Beside, I would prefer to monitor my trades once is live for that couple of hours.Once I’m in the money,I would prefer to trial my stops.
Thank you for sharing, Simon!
thank you so much God bless
Great information bro.. I think I m day trading… your transition trading really works..
I’m glad to hear that, Ali.
Well done Rayner in helping us traders !!
I prefer swing trading, Uk trading times 8am to 16:30), using a 4 hr graph, I use the Alert on MT4.
Always wait for the candles to show their direction, only when this happens do I strike. !
when this happens I then use the 5 min graph for my entry and exit using a stop loss of 1%.
Im careful with RED news as the spreads go crazy.
I dont trade FOMC and NON FARM PAYROLLS 2 hours prior their time .
Personally I do NOT hold persitions over night.
Thank you for sharing, Martin!
I’m a swing/day trader but I have tried all methods. My problem is I have difficulty trading one method. Patience is my problem. Great article Rayner.
Thank you, Michael.
Your write ups are always very interesting and resourceful too. I am a swing position trader only interested in trading Price Action at Support and Resistance. For me that involves naked trading with only the MA lines on my candle chart. Still on the elementary stage for now but working steadily on it. Thank you
You’re welcome, Emeka.
Why did you not include trend following trading Rayner ?
I did. It’s stated at the top along with position trading.
Very concise peace of work with one critical note:
You say in daytrading:
Can lose a lot more than intended if you suffer massive slippage (from Black Swan events)
I don’t think that Black Swan events should ever be considered in trading as they are too rare to get nervous about. Besides, if your maximum Risk is 2% of your capital and have stops in place no Black Swan is going to kill you financially.
Peter van der Meulen
For day trading you’re typically trading with larger size since your stops are tighter.
And during such events, you might suffer massive slippage as it’s no guarantee of getting filled (e.g. the EURCHF saga where traders had slippage of thousand pips).
With large size and huge slippage, careers are over in an instant.
I prefer to do swing trading using 1 to 4 hr time frame. Hopefully there will be more trading opportunities this way. I would also very much like to use the trend following method as seen from your videos. I think my problem is emotions.
Thank you for sharing, Sum Mun.
Thank you Rayner “Our Buddy Trader” Teo, as you always keep us educating about successful trading.
Just wanted to know that, What inspires you truly for this amazing work ?.
I do get a “KICK” whenever traders tell me how much they have benefited from sharing.
As always…no one beats your passion in sharing your knowledge for free. Big thanks Rayner!
You’re welcome, Junil!
Transition trading is so wonderful. This information is an eye opening indeed. Rayner I really don’t have enough words to thank you.
The pleasure is mine, Dave!
Thank you Rather. Great write up.
You’re welcome, Roy.
Awesome article Rayner. Learned a lot from this. Am a day trader. Like to time entries from Support and Resistance levels in the market, analyze my trades with daily and 4hr. Pick trades mostly with 4hr chart. Once again, thumbs up Rayner. Keep up the good work.
Thank you for sharing, Okere!
Thanks Rayner. Do you have any actual data as support for the claim that these can work (audited track records for example)?
You can look up firms like Dunn, Mulvaney, Winton as they are hedge funds which employ a Trend Following approach (which falls under position trading).
For short-term trading, you can look up proprietary trading firms and ask them what’s the trading methodology they adopt (which are usually day trading and scalping).
hi rayner! have not receive any notifications on your weekly videos of late. for e.g. the analysis from 5-9? Did I missed it or have you stop doing the analysis?
Thank you for all the great guidance!
I haven’t sent any recently.
But don’t worry, it’s back this week!
Great information (as always)!! I would love to hear more about the transition trading. Is there another article with more information?
Thanks for all that you do for us!!
I don’t have any more on it, but I’ll see how I can add more information in future.
Awesome post Rayner.
I am also wishing to know more about transition trading…
I’ll write more about it in a future post, cheers.
You’re awesome Rayner…..really informative article
I prefer swing trading….I can spend few hours a day for trading. Prefer low winrate + Big wins.
However I want to both make income as well as build wealth in parallel via trading.
You’re welcome, Rahul.
Thanks for sharing!
Thanks Rayner for this educational blog. It reinforces what I think I know!
Hopefully get me to be profitable with real accounts.
Hey rayner! Can a daily timeframe be used for swing trading or is it better to use the 4 hour timeframe in entering trends?
Yes, that’s possible. Both are fine.
How about you Rayner, what kind of trader are you?
Swing and position trader
How to determine Support and Resistance level ??
I don’t have any materials covered on it here.
But I pay attention to the most obvious levels and ignore the minor ones.
Hi rayner I like your website I would like to say that I would be a hybrid of swing trading as well as trend trading. I fail alot and well I dont like ofcourse no one does realy. I am asking for your almighty nolage on what would be a good trading stratagy for me.
1. I dont like spending all day on a screen.
2 I Love family time
3 i can do at least 2 hours a day
4 I am stuburn. (Half the reson for my past faliars witch i realised through your web site).
5 i am starting at a very younge age and i can learn alot through experience and others telling me what a good stratagy might be.
I also need help knowing what turms there are because wile i trade i realy HAVE NO IDEA WHAT I AM DOING. but i try to go in with a plan think of where i believe the market will go( mostly rong on my judgment ) and get somwhere with it i do use a stop loss and i am trying to find how to get a trailing stop loss for mql5
Also thanks for your website it had some helpful facts and has helped alot thanks. So i hope you could help me become a better tradsman
Thank you for sharing, Daniel.
I’m glad to be of help!
Hello dani. its painfull to here that even me i had a such problem of lossing money because I failed to abind my self into a good trading strategy for most of my past trading days,, but honestly iam telling without more effort nothing sweat can be got, so i struggled alot and it came by chance on my side a beautiful way that has low risk, good profit, and it saves time you might trade just in a week and all of your time you might do other things. For sure now iam free i can not stay much on my screen but i get time to deal with my medical school. Dani if ur ready honestly and kindly i can help you to know the strategy free just as my brother. And you shall be happier with it, i shall also help you some more other trading challenges that i have faced and the way to solve them.
Can you be a helpe to me
I’m new in the market
I want to have a good strategy? Someone help me
Thanks for the tips, information. Keep up the good work RT. I give you huge credit bro when it comes to trading.
I appreciate it, bud.
Thanks for a plausible explanation.Your write up encourages alot of people to make a firm decision to master a specific trading parttern.
You’re welcome, Musa.
I found the active management more stressful than other strategies, may I ask what strategy do you prefer?
Swing and position trading.
Thanks a lot Rayner, this is very informative, I’ll also like to learn more about Transition trading, if it’s convenient for you,may you please make a video on it with few examples, will be very appreciated
I’ll look into it, cheers.
Thank you so much Rayner, you have just helped me
I’m happy to hear that!
Great Article – Thank you!
You’re welcome, Jordan!
Very detail and precise article.
Thanks for sharing.
I now understand why I don’t make money. I will make necessary adjustments and I hope things change.
Glad to hear that!
Keep me updated on your progress, cheers!
For me i see, both trade might sense the same interm of finance because, the long term trade have a great deal of pips in profit as compared to the short term trades, so the one with short term trade will trade more to compesate the profit of the one with long term trade. But sometimes what matters is what you can see on the screen at time t, if it happens the short time has favour so you can take it and if its a long term trade you can also trade. But the major deal is about your time to trade as stated in this article.
Thank you for sharing, Abcom!
Thank you very much for this article. Where does counter trading fit then?
It can fall under day or swing trading, cheers.
Hey Rayner, whats up my Friend?
Please what MA or Donchian (DC) setting would be appropriate for the different types of trading strategies, if one wants to know what trend to follow and setups to look for?
For example, would the following suggestions work:
position trader – using the daily and weekly time frame – 200MA or 200 DC
swing trader – using the 4 hour and 1 hour time frame – 100MA or 100 DC
day trader – using the 15 mins and 5 mins time frame – 20MA or 20 DC
scalper – probably the 1 min – 20MA or 20 DC
I ask this because its not too clear how effective using, for instance, the 200MA (long term trend), on the 5 mins time frame can be, since the 5 mins time frame seems more suited for traders looking for shorter and quicker opportunities.
There’s no best indicator or settings for any timeframe.
They all have a different purpose for it.
200MA on the 5mins can be used as a long-term trend filter on the 5mins timeframe.
And the 20MA can be used to trade strong trends on the 5mins timeframe.
There really isn’t a one size fit all here.
Thanks Rayner, you’re a blessing!
Hi Rayner reading through, I come to realize without any doubt I am a swing trader, due to my full time a very demanding job which I would like to be knowledgeable and profitable with trading to catch a break. My question here is since I know what kind of trader I am and I like the trend following strategy, how can I create a trading plan that as I follow to the T, will give me an edge as u always say, in the market.
Thank you in advance.
I have been totally blown away by all of the information you have been providing us! I have been getting my trading education over the past 11 months and it always seems that people will only give you part of the information and always leave out the most important parts. And I am talking about information that I am paying for! You my friend give us the full meal deal and we are so grateful for that. You Rock!!
I really appreciate it.
You’re welcome, Akbar!
Hi Rayner, thanks a lot for your effort. I have a question… is valuta trading different then crypto trading? Can I use the same strategies? Thanks in advance!
I’ve no idea what’s valuta trading.
Hi Rayner, your article is really informative and helpful for a new and aggressive trader like myself. If it’s possible can you please make an article about the Pro’s and Con’s about being an aggressive day trader.
Your work is brilliant by the way
I’ll look into it, cheers.
I’ve never heard the term transition trading but last week I shorted the eurusd at h1 and managed the trade looking at d1. It turned out to be a 9R trade. It was my best week in months!
Reyno simply you are superb. Thank you dear.
i am a beginner and yet to find a strategy. But i’m keen to becoming a scalper
I don’t cover much on scalping as I’m not a scalper.
I have a different question. Do you have a trading platform that is proprietary. If so how much?
I don’t have such a thing.
Thanks bro for your enlightment,am a position trader I prefer using a daily chart pin bar combined with trend and areas of value.
Thanks for sharing, John!
I already try the swing strategy using FXLeaders and it works well, and while reading these strategies I think I want to try another strategy too. Thank you for sharing.
Thanks for sharing!
I rarely compliment someone on these kind of sites, but you are not only a successful trader, you are an appropriate teacher for this subject. I have tested a few German suppliers, running and offering roughly the same business-model as you do, but successful traders, even being eloquent, are often poor teachers.
So, here are my regards – and let us know, when you finally move in your penthouse and buy a supercar, because, what else should you do with your money?
To help more people grow their wealth from the financial markets without losing their pants.
Thank you so much for sharing this information….it really helps
Awesome to hear that!
Hey rayner, please I need to know more on choosing best currency pairs
I learned much more from you than i did from my teacher.. I can’t thank you enough!
I’m glad to be of help, cheers.
Am a scalper very new to trade but might change to a day trader and then swing.
I am 24/7 in front of charts and books and learning from you tube all of my times from when i lost 5k a fews week ago.Let me take more learn from you Rayner.I can spend all the times in trading.Thanks to your book.andthen if possible,show me the way to improve more than now.Thank you Ray.
You’re welcome, David!
Rayner, I like the way you teach. It is very simple and comprehensible.Can you please guide me in Trading?.
I trade mostly Support and Resistance then TRENDLINE .. I guess I’m more of a swing trader
Thanks for sharing, Awkamfon!
Started trading a few month back,I was trading like a mad man and was going mad so I dicided to take a break three week back and have since start studying Rayner web site and learning about trading and it’s like a pin dropping in my mind
It been powerful information.thanks bud
Thank you boss I have learnt a lot from this, I want to be a day trader, and scalping small. I’m a beginner
hi Rayner, i am using trend following, my entries are pull backs.
Thanks for sharing!
i am a newbie trader and im follwing you, sir Rayner Teo., and im learning everytime.
i chose day trading and scalping coz i have all my time in a day, and a have a daily goal to achieve..
thank you for all the materials available here, it realy helps me a lot..
Glad to be of help!
I’VE NEVER seen a site like this I’m so glad I stumbled across it been using these methods and boy oh boy The Best I salute Rayner thanks a lot
I will prefer swing trading because that’s what suit me. Thank you Rayner.
I use support and resistance combined with an 8 EMA and 20 SMA for entry
Thanks for sharing!
hey buddy, right now im swing trader and as you said it has higher win rates and barely 1 to 1 risk to reward, i think position trading is fine for me in the way that i just give 20% of my portfolio to it cause im in stock market, in the other hand your transition trading got my attention and im gonna check that out, with higher win rate and that insane risk to reward it will be something
Awesome, let me know how it works for you. cheers
I cannot afford to be looking at the chart 24/7 and i am still on the demo
Is it good for trading if i use ECN account?…my strategy is..day trading, scalping
i have few hours available every day,i would try position trading,thank you for your high spirit to teach the begginers.
Thanks for the information.. I am a medical student with limited time and I just started learning about forex trading..please can I still make an income trading
Hi Rayner , can you describe one rout to be trader for example :
1-Define what trader you are
2-Make Trading Plane
3-Find strategies and master them for differente conditions of market
Very good best of luck for you
hi Rayner, whats up my friend!
im following you for couple of months now. and your advice is the best so far, and i thank you for that. im new in trading i started about year ago just to see what is forex all about. lost Little money gave up and now im back for couple of months in forex.
im trading with my demo account testing myself all that ive learned so far and mostly from you.
but so far my winning rate over 100 trades is about 80%
so best trading strategy for me is swing trading.
Awesome! Let me know how it works out for you, cheers.
Everything here have just been wonderful and awesome thanks RAYNER,am a beginner but i know your the right person to take me through
I want to know the three strategies so that i can choose my own time…..Position trading, Day trading and scalping then the swing trading….
Thank you so much for the learning sir….I hope someday I can be a successful trader…..God willing
Thank you so much for your sharing. I happened to explore your website a few days ago. Your teaching is concise and easy to understand. Learning has never been so clear from books and other websites. I’m looking forward to an improved and profitable trading journey.
Glad to help out, Amanda!
This was quite encouraging and educative
Glad to hear that!
books for fx trading
Day trading is the one I’m very interested in right now. I just opened up a TD Ameritrade account, what’s your thoughts on this particular institution? What else would you recommend?
Break out trading
Looks like I,m a Break Out /Swing trader .
Your Posts have focused my trading more than ever before Rayner , Thank you so much .
My win / loss ratio has improved immensely with now a better trading plan and has shown me the weak points of my previous trading style .
I now spend only 30min a day in front of the screen instead of 2 hours ( end of day data ) with this now very much streamlined trading system .
Forever grateful for you help , thankyou Rayner .
Awesome to hear that, Peter!
I like scalping and daytrading
Hi Rayner, thanks for sharing your knowledge. I am currently spending most of my time day trading and scalping, but I am still a raw novice learning all the time.
No worries, take all the time you need. Baby steps!
First of all find your teachings very useful to me thank you for your dedication , i haven’t started trading yet m still learning but the strategy that are attracted is SWING TRADING STRATEGY i love it , it will fit my personality also i have a full time job
Awesome to hear that!
And trend following?
Why wouldn’t you be able to use a 5Min timeframe if you for a full time job? lets assume you get home at 5:30, and you can trade from 7pm-12am, is that not enough time?
Yes, you could if you’re willing to sacrifice everything else.
Im think im doing the position and swing strats
I’m a newbie, I find day trading and calping fascinating. I have all the time in the world to sit in front of my screen. Which time frames should I focus on Ray
I generally use Price action trading based on technical analysis. But some time win and some time loose. Prefer daily closing basis US time frame. But I am Indian and some time I miss the exact closing. But I think Swing trading strategy is the best of all .
Hi Rayney, this is Bryan from Sydney Australia. I am currently trying to set up a trading plan by studying your numerous YouTube uploads in conjunction with my cycle analysis.
I believe there are trading cycle (1 month or 20 day), primary cycle (20 week or 100 day), seasonal cycle (50 week or 200 day) and long term cycle (4 year or 200 week) in a market.
My trading plan is looking for a position trade of primary cycle in a direction of seasonal cycle. And I use a price action in a 4 hour chart to enter a trade to maximise R/R ratio in the trade.
All of this can be done in the daily time frame! (Thanks for your TAE method, finding a trend using MAs, support and resistance and price action trading methology…)
I set up a daily chart with four MAs. The four MAs are 20 EMA, 50 EMA, 100 EMA and 200 SMA.
The 200 SMA defines the long term trend of market. If price is above the 200 SMA, the long term trend is up and vice verse.
The 50 and 20 EMA act as an area of value so when price is on or in the 50 and 20 EMA zone, I look to enter a trade in the direction of the long term trend.
Finally when I enter the trade, I look at 4 hout chart for a market structure and support/ resistance and candle stick patterns to execute my trade in maximising R/R ratio.
Now here is my thought on how to improve our winning rate using the cycle analysis.
Let’s consider two market cycles, 20 week primary cycle representing 100 EMA and 30 day trading cycle representing 20 EMA on the daily chart. In the cycle analysis, there is also a half span cycle which used to identify a cycle low when a prevailing trend is strong. So the half span of primary cycle is 50 EMA.
Now, we can state as follow in terms of the cycle analysis. The 30 day trading cycle lows occur when price is on or below the 20 EMA on the daily chart. Similarly, the 20 week primary cycle lows occur when price is on or below the range of 50 and 100 EMA (called primary cycle zone).
Therefore, if we can enter the long trade at the cycle lows in up trend or cycle highs in down trend, we could maximise our profit potential and at the same time minimise our loss potential.
I am trying to return to trade again after 5 years of rest and currently studying the market to set up my trading plan. Thanks for Rayner to sharing a valuable knowledge and experience of profitable trading.
Currently, I am a one trick pony, looking at the ASX 200 index but I like to expand to various Forex, world indices and commodities, If you could help me how to trade in those markets I would be greatly appreciated.
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