There are various styles of forex trading that can help you determine a trading strategy that suits you. Therefore, understanding trading styles helped you become more efficient in forex trading. This article will explain the types of forex trading styles to help you understand them better.
There are four types of forex trading styles for beginners, including:
1. Short-Term Trading
Short-term trading is a type of forex trading that follows short-term trends, usually on a daily basis. It requires constant monitoring of the market, as short-term traders do not hold their orders overnight and profit from small price movements. However, this trading style also helps to minimize market volatility risks, and traders do not need to pay overnight swap fees to brokers.
2. Long-Term Trading
Long-term trading is a type of forex trading that follows a long-term trend with a time frame of more than one day, such as weekly or monthly. This style of trading does not necessarily require you to monitor the charts all day, as it aims to profit from significant price movements over a longer period of time. Long-term trading is a low-risk trading style. However, you need to analyze price trends accurately, and you must pay spreads to your broker.
3. Trend Trading
Trend trading is a style of forex trading that follows an upward trend, which makes it easy to determine where to place orders. It is suitable for beginners, and you can use various indicators such as trendlines and moving averages to increase the accuracy of trend analysis in the forex market. However, setting a stop loss and making a profit every time you trade can help reduce trading errors.
4. Counter-Trend Trading
Counter-trend trading is a forex trading style that goes against the market trend, with the trend line indicating the opposite direction.
- If the trend line indicates a downtrend, it is recommended to open a buy order.
- If the trend line indicates an uptrend, it is recommended to open a sell order.
However, counter-trend trading is a high-risk style that requires support from indicators. One commonly used indicator for this style is the Bollinger Band, which follows these analysis principles:
- It is recommended to wait for the candlestick to break the Upper Band or Lower Band by around 90% of the body and use the RSI indicator for analysis.
- It is recommended to open an order immediately when the candlestick chart shrinks.
Conclusion
In general, beginners in Forex trading can choose from four trading styles: Short-term trading, Long-term trading, Trend trading, and Counter-trend trading. These styles help establish a trading strategy. Additionally, using indicators in combination can improve analysis accuracy, increasing the chances of profitability and trading efficiency.
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Updated
11 months ago
(May 12, 2023 16:50)
