A classic forex CFD trading strategy is a button to unlock the success doors of forex trading. Without a typical trading strategy, you may rely on noise trading and progressively make losses. Worse yet, you may never graduate from a novice to an expert trader, earning a dream income.
Simply put, the best forex CFD trading strategy depends on various factors. Examples of factors to consider are lifestyle, personality type, risk tolerance, and frequency of exposure to opportunities. The factors enable various traders to prioritize different forex CFD trading strategies like scalping, day trading, swing, trend, or news trading. Let us get started with ways to spot the best forex CFD trading strategy.
How to Pick the Best Forex CFD Trading Strategy
Since forex CFD trading riskiness can result in massive losses, it would be best to backtest a trading strategy that suits your lifestyle before starting real trading. All you do is open a demo account on a classic trading platform such as MetaTrader 4.
After logging into the mt4 interface, enable the backtesting feature on the View sub-menu. Then, you come across your Expert Advisor and an indicator. Analyze the viability of a currency pair under various strategies (explained below).
Focus on personal lifestyle choices, such as the available time to monitor trades. Does your personality allow you to concentrate on trading screens for a chunk of the day? What is your risk tolerance?
Lastly, determine if the chosen strategy presents you with multiple opportunities. You can then settle with one of the following forex CFD trading strategies.
5 Forex CFD Trading Strategies that Every Forex Trader Ought to Understand
Understanding the kernel of various trading strategies enables you to switch their application environments accordingly. Here is how you should get started with any of the strategies.
1. Scalping Strategy
Scalping strategy entails gathering small profits from multiple actions within a short trading duration. It is the best forex CFD trading strategy to trade on the shortest sessions. Most scalpers trade for seconds or a few minutes.
The trading session ends within a day, never extending into overnight activities. The prompt action-reaction model requires you to stay closer to short-term ticket charts. It would help to pick a broker with tight spreads and a quick execution time.
2. Day Trading
Apply day trading if you want to trade currency pairs on various global markets. It lacks overnight positions and requires using technical analysis on short-term charts. The strategy demands much of your time. It would be best to possess skills such as high-risk appetite, expertise, and disciple to keep learning changing trading challenges.
3. Trend Trading
Trend trading strategy is best for a market that trends. Unlike a ranging market, in a trending market, the currency pair price maintains an overall fall or rise direction. You can earn by predicting the current prices to keeping falling or rising.
In a ranging market, the overall sideways price pattern is characterized by resistance and support levels. Resistance levels prevent excessive rise. Price values divert on hitting the resistance level during a price fall.
4. News Trading
Through News trading, you rely on economic calendars to make critical decisions. You become keen on support and resistance levels to enable you to enter positions. By tracking economic data releases, you can conduct technical and fundamental analyses.
5. Swing Trading
Go for a swing or momentum trading strategy if you plan to hold a trading position for several sessions. A typical trading session ranges between a day and a month. Examples of signals to monitor with this strategy are entry and exit positions. It would be best to monitor market phases like accumulation and distribution.
Momentum indicators, such as RSI and MACD, suit swing trading strategy. They help you notice the rate of price change. Besides, you can track who controls the market. For example, an RSI above 70 symbolizes an overbought market. On the other hand, an RSI reading below 30 implies sellers control the market.
The most typical forex CFD trading strategies are swing, news, trend, day, and scalping trading. Pick a suitable strategy depending on your risk tolerance, lifestyle, and the frequently available opportunities.