There are fundamental approaches to forex trading depending on the kind of trader you happen to be. There are also a whole bunch of different trading strategies which can be adopted, usually categorized into either short or long term, and the ones you pursue are likely to depend on whether you see yourself as a Swing Trader, Position Trader or a Scalper.Trading strategy depends on the type of trader you areWhether working for the short-term shift in prices or the long-term, your success will depend on the different strategies utilized. For instance, if you are a strategic planner with a finger on the pulse of market information then you might consider yourself a News Trader, but if you are ideally suited to spotting rapid market shifts then a Day Trader strategy might be best for you.
Long-term trading strategiesBy definition, a long-term investor will need a lot more patience than a short-term one. However, it might also prove to be much less stressful. Your long-term strategy might be defined by one of two strategy positions:Trading Trends - Instead of merely predicting the highs and the lows of a position, trading trends begins where this new high or low starts. Spotting this position as being a new one is the time to get in. Swing Trading - This is where traders look for a price that either spikes up or down. By watching the market very closely, swing traders can mentally calculate the particular resistance and support of that position. They can watch for momentum to shift before the currency does. Swing trading is best for positions lasting two to seven days.The key to successful long-term trading lies in the ability to identify and comprehend indicators, strategies and signals alongside strictly managing the money used in that strategy. This inevitably involves multiple smaller trades that generate lower but more consistent returns.Short-term trading strategiesThese strategies for day trading can be initiated from almost any trading platform and device, including smartphones. Commonly included tactics such as scalping will be key skills here where the market will need to be watched like a hawk. You'll want to keep in mind that short-term trading tends to require more of your time and energy.Moving Averages - A combination of different moving metrics is required to establish a position and then identify a trend in the currency. A simple moving average might be used to identify the trend and a weighted moving average might be used to confirm the time to buy that position.Relative Strength Index - Traders will use this chart indicator to identify the historical strength and the weakness of a currency to determined when it has been overbought. Readings range between zero and 100 - readings above 70 and below 30 crucial to buying and selling.Forex traders should use a range of different strategies and apply different triggers when analysing currency movement. But an understanding of both long and short-term trading strategies will ultimately be required to make the right calls if any position is going to be sustainable. Understanding the type of trader you are and the risks you are willing to take will help form your trading strategies and help you to understand the right calls and positions.