The trading strategies we represent are suitable for all traders who are novice in trade or want to improve their skills. All the strategies classified and explained below are for educational purposes and can be applied by each trader in a different way.

In order to help you meet your educational needs and create your own portfolio of trading strategies, IFC Markets provides you both with reliable resources on trading and complete information on all the popular and simple forex trading strategies applied by successful traders.

One of the most powerful means of winning a trade is the portfolio of Forex trading strategies applied by traders in different situations. Following a single system all the time is not enough for a successful trade. Each trader should know how to face up to all market conditions, which, however, is not so easy, and requires a deep study and understanding of economics.

Trading Strategies Based on Forex Analysis

Perhaps the major part of Forex trading strategies is based on the main types of Forex market analysis used to understand the market movement. These main analysis methods include technical analysis, fundamental analysis and market sentiment.

Each of the mentioned analysis methods is used in a certain way to identify the market trend and make reasonable predictions on future market behaviour. If in technical analysis traders mainly deal with different charts and technical tools to reveal the past, present and future state of currency prices, in fundamental analysis the importance is given to the macroeconomic and political factors which can directly influence the foreign exchange market. Quite a different approach to the market trend is provided by market sentiment, which is based on the attitude and opinions of traders. Below you can read about each analysis method in detail.

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Forex Technical Analysis Strategies

Forex technical analysis is the study of market action primarily through the use of charts for the purpose of forecasting future price trends. Forex traders can develop strategies based on various technical analysis tools including market trend, volume, range, support and resistance levels, chart patterns and indicators, as well as conduct a Multiple Time Frame Analysis using different time-frame charts.

Technical analysis strategy is a crucial method of evaluating assets based on the analysis and statistics of past market action, such as past prices and past volume. The main goal of technical analysts is not the measuring of asset’s underlying value, they attempt to use charts or other tools of technical analysis to determine patterns that will help to forecast future market activity. Their firm belief is that the future performance of markets can be indicated by the historical performance.

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Forex Trend Trading Strategy

What is Trend Trading

A trend is nothing more than a tendency, a direction of market movement, i.e. one of the most essential concepts in technical analysis. All the technical analysis tools that an analyst uses have a single purpose: help identify the market trend. The meaning of the Forex trend is not so much different from its general meaning - it is nothing more than the direction in which the market moves. But more precisely, foreign exchange market does not move in a straight line, its moves are characterized by a series of zigzags which resemble successive waves with clear peaks and troughs or highs and lows, as they are often called.

Trend trading is considered a classic trading strategy, as it was one of the first of them, and takes its rightful place today. We believe that trend trading will remain relevant among traders around the world in the future. All thanks to three main, but simple principles:

Buy when the market goes up, i.e. we are seeing an uptrend/bullish trend

Sell when the market goes down, i.e. we are seeing a downtrend/bearish trend

Wait and take no action when the market moves neither up nor down, but horizontally, i.e. we are seeing a sideways trend/consolidation

Sideways trend

The trend following strategy can be applied to trade on a wide variety of timeframes, but the most accurate forecasts and lower risks relate to medium and long-term trading, where stronger and long-lasting trends are observed. Trend trading can be the best choice for swing traders, position traders, i.e. those who see and predict the direction of the market movement in the future. However, both scalpers and day traders also catch trends, but less strong and very short-lived, a sort of fluctuations within the main trend.

Any trader, regardless of their trading method, must first of all use technical analysis to determine the current trend in the market of a traded asset and try to predict its further development, using technical analysis. The technical analysis tools applied are usually extremely simple and user-friendly, each trader can select a variety of indicators, lines, time frames, etc., based on the characteristics of the asset they invest in, their individual preferences and other factors. However, the most commonly used ones are moving averages of different periods, Bollinger bands, the Alligator indicator, Ichimoku cloud, Keltner channels, MACD and ADX indicators, as well as various advanced modifications of classic indicators. Since the indicators are inherently lagging, i.e. reflect the impact of past events and market movements, it is also important to use oscillators to predict the development of the trend and identify the entry points, set stop loss, take profit, trailing stop orders correctly.

Here are three main techniques for entering the market:

Classic (i.e., entering the market at the intersection of two moving averages) At a breakout (i.e., placing a pending order and entering the market after confirming the price intention to continue the trend) At a retreat (i.e., entering the market not immediately by a trading signal, but later, when the price is at a more favorable level)

Breakout and classic techniques have some similarities, for example, in both cases the absence of a take profit order and the setting of a trailing stop would be a rational decision. Entering the market at a retreat is riskier, since there is no guarantee the trend will continue as intended rather than reverse.

But back to the types of trends in Forex. According to the theory of supply and demand, the market has 4 main phases of development:

Accumulation (sideways movement, consolidation). Markup (bullish trend/uptrend). Distribution (sideways movement, consolidation). Markdown (bearish trend/downtrend).

In fact, on a two-dimensional chart, the trend can move up (phase №2), down (phase №4), or remain relatively horizontal (phases №1 and №3). Let's go through each of the types of trends in Forex separately.

An uptrend, or bullish trend, is a movement in the price of an asset when the lows and highs progressively increase, i.e. every next maximum/minimum is higher than the previous maximum/minimum. In fact, the bullish trend identifies a growth in price on a specific timeframe. As a rule, traders begin to actively buy exactly on the ascent of the trend line, but often they open positions when the bullish bias reaches its peak and flows into the phase of distribution, in which the price moves horizontally and prepares for the final phase of the bullish trend.

Bullish trend

However, non-professional traders hold their positions longer than necessary at the end of an uptrend, hoping for the trend to continue, and often move into drawdown and lose their investments. More experienced traders manage to correctly detect the end of the 1st market phase, i.e. just before the price advances, and open long positions. Short positions are opened either during the distribution phase or at the very beginning of the 4th phase when the trend reverses. The current bullish trend can be detected by drawing the support line at the low points: the price bounces up at the lows, as if pushing off the support line, thereby increasing the highs. If the support line vector on the chart is pointing up, then this is definitely an uptrend.

A downtrend, or bearish trend , is a movement in the price of an asset when the lows and highs consistently decrease, every next maximum/minimum is lower than the previous maximum/minimum. In fact, the bearish trend identifies a fall in price on a particular timeframe. The downtrend goes through the same phases and in the same sequence as an uptrend: accumulation of positions, stabilization of the trend, distribution (consolidation).

Bearish trend

However, if traders go long during the uptrend, then the downtrend implies the opening of short positions, and it is important to set sell orders (including pending orders) within the distribution phase at the desired price. In a downtrend, the trend line (in this case, the resistance line) is drawn along the tops: the price, as if meeting resistance, repels and tends downward, then, with a slight correction, rises back to the support line and bounces off. If the resistance line vector on the chart is directed downward, then this is definitely a downtrend.

There is an expression popular among traders: “Trend is your friend” which applies to both the uptrend and the downtrend. However, we can observe an apparent trend only 20-30% of the time, the rest of the time the market is relatively neutral and remains flat, i.e.the price is traded in a narrow range, shifting between resistance and support lines. A sideways trend, or consolidation, occurs when the potential of bears and bulls becomes equal, this often happens before the release of important macroeconomic and other news, since traders do not know exactly how this news will affect the movement of the asset’s price. That is why the sideways trend acts as the first and third market phases when positions are accumulated and distributed. Also, sideways movement occurs due to the lack of players in the market between trading sessions or during trading of any asset at an atypical time for it (for example, when trading a European currency pair before the opening of the European session). Trading in a sideways trend is possible, but extremely risky. Such a movement will work more for scalpers who make money precisely from small and frequent fluctuations within predictable limits.

Let's sup up the above with a few remarks:

Trend is your friend, definitely. But you shouldn’t trade without taking into account the main principles of money and risk management and in the absence of a well-thought-out strategy. The Forex trend trading is inherently simple, but this doesn’t mean it is inefficient. The complexity of trading strategies would only hinder the trader. At least 2 timeframes are required to identify the trend more reliably. You can visually understand the direction of the trend as follows: the price from the lower left corner rises to the upper right corner - a bullish trend; the price from the upper left corner falls to the lower right corner - a bearish trend; the price moves flat and horizontally - a sideways trend. The market moves horizontally about 70% of the time, but trading with such a movement is not worth it unless you have experience and a clear understanding of the market behavior during the accumulation and distribution phases. The more often the price meets the resistance/support line and, repelling, keeps the movement vector, the stronger and more stable the trend. If the price goes up/down sharply and steeply, the trend is more likely to reverse. If the trend is flatter, evenly rising/falling, then there is a high probability that it will last long.

Support and Resistance Trading Strategy Guide

What are the Support and Resistance lines and how to draw them on a chart? Among the fundamental and most commonly used technical analysis tools, support and resistance (SR) levels have a special place. Moreover, strategies based on them are used not only by beginners, but also by quite experienced traders, who have many other tools at their disposal, as well as extensive trading experience. So why have these simple lines become so widely used by investors? Let's think about this together. SR levels are conditional areas that each trader allocates individually by the price extremes - minimums and maximums, on a certain timeframe. These areas are often represented as lines, however, to calculate all the risks and correctly place orders, it is still better to depict the SR as areas on the chart. It should be known that support and resistance lines on different timeframes will be drawn in completely different ways. It's worthy to note that SR lines on large timeframes, such as H1, H4, D1 and larger, are more reliable and less likely to be broken through, the same cannot be said for the SR lines drawn on M1, M5 or M15. There are no specific rules about whether to draw levels by candlestick bodies or by their shadows: experts have not yet agreed on this issue.



Reasons for the formation of Support and Resistance Areas To understand how Support & Resistance levels are formed and how to use them, we need to analyze the psychological component of this phenomenon. A market trend formation depends on the prevalence of one of three conditional groups in the market: Bears (open sell positions) Bulls (open buy positions) Undecideds (not yet on the market) Imagine a situation with the price fluctuating in a consolidation area near the support line. Bears sell assets, bulls actively buy, and then the price begins to rise. In such a situation, the bears regret going short, and as soon as the price returns to the support line, they will close their orders to have a chance to break even. The bulls are happy with this scenario, since their positions get profitable when the price rises, and at the very first correction of the price to the support line, they will go long again, as they believe the price will bounce off the support level one more time. Those traders who haven’t yet opened orders see that the sideways trend has turned upward and consider the moment of price correction and its rebound from the support level the most favorable for placing buy orders. Thus, we see a clear BUY sentiment among traders at the very first, even slight price movement towards the support line. And when this happens, a huge number of market participants immediately go long, i.e. demand surges sharply, and supply does not keep pace with it, so the price rises as expected. The situation is reversed in the case of the resistance line, where supply rises steeply and demand slips downwards. With such a common example, we can see a direct relationship between the Supply/Demand ratio and the Support/Resistance levels vector. This is why Support/Resistance lines are often called Supply/Demand levels. How to trade using support and resistance levels? We have sorted out the reasons how the S/R areas form. Now let's look at trading strategies based on support and resistance levels. When on the chart the price approaches the support or resistance line, it is expected to either bounce off that line or break it. So, traders distinguish 3 types of trading based on the Support/Resistance levels: trading based on a rebound from levels (range trading), trading based on a level breakout, and a mixed type of trading (allows you to use both strategies alternately, depending on the current market situation). Let’s consider the two key strategies: Range Trading From the example above, it can be seen that with a significant accumulation of bullish potential, as the price approaches the support line, it is more likely that the price will reverse from the level. Then you can go long, placing the stop loss below the support level. When the price moves towards the resistance line, and bearish sentiments prevail in the market, traders begin to actively open sell orders, as soon as the price reaches the Resistance level. As a result, the price bounces off the level and goes down. In this case, the stop loss is usually placed above the resistance level. Using a take profit order and trailing stop mode also reduces the risk of losses and helps to fix profits in time. A rebound from levels occurs most often within consolidation (actually, the market is in this phase about 70% of the time), since the price alternately bounces from one level to another, so such trading is quite attractive for scalpers and short-term traders: insignificant profit per trade is compensated by the frequency of orders. Breakout Trading With large volumes in the market and a strong trend movement, the price may break through the support or resistance line, instead of reversing from it. Trend traders benefit the most from this price behavior. If the price breaks the resistance level from the bottom up, then returns to this level during correction, the price is not always able to punch it from the other side, so it bounces up from the level, forming an upward trend. Thus, after the breakout the resistance line turns into a support line.

If the price breaks through the support line from top down, and upon returning to this line, the price isn’t always able to break it from the opposite side now, so it ricochets off the level and continues its downward movement, becoming a downtrend. In this case, the support line is transformed into a resistance line after the breakout.

In some cases, after breaking through the support/resistance level once, the price crosses it back from the opposite side during the correction and returns to the previous price range. It's called a false breakout. Key Takeaways of Support and Resistance Trading Trading based on support and resistance levels is suitable for all types of markets: currency, commodity, stock. Also, it is applicable to any timeframe.

The principles of such trading are simple and straightforward.

It is easy to identify support and resistance zones with the help of moving averages and trend lines on any timeframe. They often act as Support/Resistance levels themselves.

Levels are a universal tool for technical analysis. They are unbiased, since most traders are guided by them.

The more often a level is tested, the stronger it is considered. However, you need to be extremely careful in order to timely notice changes in the trend and its possible reversal.

Several false breakouts indicate the stability and strength of the level.

Fibonacci levels, moving averages of at least two large periods with round numeric values, the Lines algorithm, the PZ and IchimokuSuppRes indicators, Pivot Points, Bollinger Bands, Fractals and many others can help identify the S/R areas. In conclusion, it’s worth noting that the concepts of Support and Resistance levels are not new in trading; many investors are guided by them and build their strategies accordingly. However, there are also those who believe that the levels based on old data may be useful in analyzing the market development in the past, but not in predicting the future movements, since there are no guarantees that the market will behave in one way or another, because there are plenty of factors influencing the market, and the behavior of millions of market participants is unpredictable.

Forex Range Trading Strategy

Range trading strategy, which is also called channel trading, is generally associated with the lack of market direction and it is used during the absence of a trend. Range trading identifies currency price movement in channels and the first task of this strategy is to find the range. This process can be carried out by connecting a series of highs and lows with a horizontal trendline. In other words, the trader should find the major support and resistance levels with the area in between known as “trading range”.

In range trading it’s quite easy to find the areas to take profit. You can buy at support and sell at resistance as long as the security hasn’t broken out of the channel. Otherwise, if the breakout direction is not favorable for your position, you may undergo huge losses.

Range trading actually works in a market with just enough volatility due to which the price goes on wiggling in the channel without breaking out of the range. In the case the level of support or resistance breaks you should exit range-based positions. The most efficient way of managing risks in range trading is the use of stop loss orders as most traders do. They place sell limit orders below resistance when selling the range and set the take profit down near support. When buying support they place buy limit orders above support and place take profit orders near the previously identified resistance level. And risks can be managed by placing stop loss orders above the resistance level when selling the resistance zone of a range, and below the support level when buying support.

Technical Indicators in Forex Trading Strategies

Technical indicators are calculations which are based on the price and volume of a security. They are used both to confirm the trend and the quality of chart patterns, and to help traders determine the buy and sell signals.The indicators can be applied separately to form buy and sell signals, as well as can be used together, in conjunction with chart patterns and price movement.

Technical analysis indicators can form buy and sell signals through moving average crossovers and divergence. Crossovers are reflected when price moves through the moving average or when two different moving averages cross each other. Divergence happens when the price trend and the indicator trend move in opposite directions indicating that the direction of price trend is weakening.

They can be applied separately to form buy and sell signals, as well as can be used together, in conjunction with the market. However, not all of them are used widely by traders. The following indicators mentioned below are of utmost importance for analysts and at least one of them is used by each trader to develop his trading strategy:

Moving Average

Bollinger Bands

Relative Strength Index (RSI)

Stochastic Oscillator

Moving Average Convergence/Divergence (MACD)

ADX

Momentum

You can easily learn how to use each indicator and develop trading strategies by indicators.

Forex Charts Trading Strategies

In Forex technical analysis a chart is a graphical representation of price movements over a certain time frame. It can show security’s price movement over a month or a year period. Depending on what information traders search for and what skills they master, they can use certain types of charts: the bar chart, the line chart, the candlestick chart and the point and figure chart.

Also they can develop a specific strategy using the following popular technical chart patterns:

Triangles

Flags

Pennants

The Wedge

The Rectangle Pattern

The Head and Shoulders Pattern

Double Tops and Double Bottoms

Triple Tops and Triple Bottoms

You can easily learn how to use charts and develop trading strategies by chart patterns.

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Forex Volume Trading Strategy

Volume shows the number of securities that are traded over a particular time. Higher volume indicates higher degree of intensity or pressure.Being one of the most important factors in trade it is always analyzed and estimated by chartists. In order to determine the upward or downward movement of the volume, they look at the trading volume gistograms usually presented at the bottom of the chart. Any price movement is of more significance if accompanied by a relatively high volume than if accompanied by a weak volume.

By viewing the trend and volume together, technicians use two different tools to measure the pressure. If prices are trending higher, it becomes obvious that there is more buying than selling pressure. If the volume starts to decrease during an uptrend, it signals that the upward trend is about to end.

As mentioned by Forex analyst Huzefa Hamid "volume is the gas in the tank of the trading machine". Though most traders give preference only to technical charts and indicators to make trading decisions, volume is required to move the market. However, not all volume types may influence the trade, it’s the volume of large amounts of money that is traded within the same day and greatly affects the market.

Multiple Time Frame Analysis Strategy

Using Multiple Time Frame Analysis suggests following a certain security price over different time frames.

Since a security price meanwhile moves through multiple time frames it’s very useful for traders to analyze various time frames while determining the “trading circle” of the security. Through the Multiple Time Frame Analysis (MTFA) you can determine the trend both on smaller and bigger scales and identify the overall market trend. The whole process of MTFA starts with the exact identification of the market direction on higher time frames (long, short or intermediary) and analyzing it through lower time frames starting from a 5-minute chart.

Experienced trader Corey Rosenbloom believes that in multiple time frame analysis, monthly, weekly and daily charts should be used to assess when the trends are moving in the same direction. However, this may cause problems because time frames don’t always align and different kind of trends take place on different time frames. According to him, the analysis of lower time frames gives more information.

Forex Trading Strategy Based on Fundamental Analysis

While technical analysis is focused on the study and past performance of market action, Forex fundamental analysis concentrates on the fundamental reasons that make an impact on the market direction.

The premise of Forex fundamental analysis is that macroeconomic indicators like economic growth rates, interest and unemployment rates, inflation, or important political issues can have an impact on financial markets and, therefore, can be used for making trading decisions.

Technicians do not find it necessary to know the reasons of market changes, but fundamentalists try to discover “why”. The latter analyze macroeconomic data of a specific country or different countries to forecast the given country’s currency behaviour in the nearest future.

Based on certain events or calculations, they may decide to buy the currency in the hope that the latter will rise in value and they will be able to sell it at a higher price, or they will sell the currency to buy it later at a lower price.

The reason why fundamental analysts use so long timeframe is the following: the data they study are generated much more slowly than the price and volume data used by technical analysts.

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Forex Trading Strategy Based on Market Sentiment

Market sentiment is defined by investors’ attitude towards the financial market or a particular security. What people feel and how this makes them behave in Forex market is the concept behind market sentiment.

The importance of understanding the opinions of a group of people on a specific topic cannot be underestimated. For each purpose sentiment analysis can offer insight that is valuable and helps to make right decisions.

All traders have their own opinions about the market movement, and their thoughts and opinions which are directly reflected in their transactions help to form the overall sentiment of the market.

The market by itself is a very complex network made up of a number of individuals whose positions actually represent the sentiment of the market. However, you alone cannot make the market move to your favor; as a trader you have your opinion and expectations from the market but if you think that Euro will go up, and others do not think so, you cannot do anything about it.

Herein, the market sentiment is considered bullish if investors anticipate an upward price movement, while if investors expect the price to go down, the market sentiment is said to be bearish. The strategy of following Forex market sentiment serves as a good means of predicting the market movement and is of high importance for contrarian investors, who aim to trade in the opposite direction of the market sentiment. Thus, if the prevailing market sentiment is bullish (all the traders buy), a contrarian investor would sell.

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Forex Strategies Based on Trading Style

Forex trading strategies can be developed by following popular trading styles which are day trading, carry trade, buy and hold strategy, hedging, portfolio trading, spread trading, swing trading, order trading and algorithmic trading.

Using and developing trading strategies mostly depends on understanding your strengths and weaknesses.In order to be successful in trade you should find the best way of trading that suits your personality.There is no fixed “right” way of trading; the right way for others may not work for you. Below you can read about each trading style and define your own.

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Forex Day Trading Strategies

Day trading strategy represents the act of buying and selling a security within the same day, which means that a day trader cannot hold any trading position overnight.

Day trading strategies include scalping, fading, daily pivots and momentum trading. In case of performing day trading you can carry out several trades within a day but should liquidate all the trading positions before the market closure.

An important factor to remember in day trading is that the longer you hold the positions, the higher your risk of losing will be. Depending on the trading style you choose, the price target may change. Below you can learn about the most widely used day trading strategies.

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Forex Scalping Strategy

Forex scalping is a day trading strategy which is based on quick and short transactions and is used to make many profits on minor price changes. This type of traders, called as scalpers, can implement up to 2 hundreds trades within a day believing that minor price moves are much easier to follow than large ones.

The main objective of following this strategy is to buy /sell a lot of securities at the bid /ask price and in a short time sell/buy them at a higher/lower price to make a profit.

There are particular factors essential for Forex scalping. These are liquidity, volatility, time frame and risk management. Market liquidity has an influence on how traders perform scalping. Some of them prefer trading on a more liquid market so that they can easily move in and out of large positions, while others may prefer trading in a less liquid market that has larger bid-ask spreads.

As far as it refers to volatility, scalpers like rather stable products, for them not to worry about sudden price changes. If a security price is stable, scalpers can profit even by setting orders on the same bid and ask, making thousands of trades. The time frame in scalping strategy is significantly short and traders try to profit from such small market moves that are even difficult to see on a one minute chart.

Together with making hundreds of small profits during a day, scalpers at the same time can sustain hundreds of small losses. Therefore, they should develop a strict risk management to avoid unexpected losses.

Fading Trading Strategy

Fading in the terms of forex trading means trading against the trend. If the trend goes up, fading traders will sell expecting the price to drop and in the same way they will buy if the price rises.

Herein, this strategy supposes selling the security when its price is rising and buying when the price is falling, or as called “fading”.

It is referred as a contrarian day trading strategy which is used to trade against the prevailing trend. Unlike other types of trading which main target is to follow the prevailing trend, fading trading requires to take a position that goes counter to the primary trend.

The main assumptions on which fading strategy is based are:

Securities are overbought

Early buyers are ready to take profits

Current buyers may appear at risk

Although “Fading the market” can be very risky and requires high risk tolerance, it can be extremely profitable. To carry out Fading strategy two limit orders can be placed at the specified prices- a buy limit order should be set below the current price and a sell limit order should be set above it.

Fading strategy is extremely risky since it means trading against the prevailing market trend. However, it can be advantageous as well - fade traders can make profit from any price reversal because after a sharp rise or decline the currency it is expected to show some reversals. Thus, if used properly, fading strategy can be a very profitable way of trading. Its followers are believed to be risk takers who follow risk management rules and try to get out of each trade with profit.

Daily Pivot Trading Strategy

Pivot Trading aims to gain a profit from the currency’s daily volatility. In its basic sense the pivot point is defined as a turning point. It is considered a technical indicator derived by calculating the numerical average of the high, low and closing prices of currency pairs.

The main concept of this strategy is to buy at the lowest price of the day and sell at the highest price of the day.

In mid-1990s a professional trader and analyst Thomas Aspray published weekly and daily pivot levels for the cash forex markets to his institutional clients. As he mentions, at that time the pivot weekly levels were not available in technical analysis programs and the formula was not widely used either.

But in 2004 the book by John Person, “Complete Guide to Technical Trading Tactics: How to Profit Using Pivot Points, Candlesticks & Other Indicators” revealed that pivot points had been in use for over 20 years till that time. In the last years it was even more surprising for Thomas to discover the secret of quarterly pivot point analysis, again due to John Person.

Currently the basic formulae of calculating pivot points are available and are widely used by traders. Moreover, pivot points calculator can be easily found on the Internet.

For the current trading session the pivot point is calculated as:

P = (H + L + C)/3 Pivot Point = (Previous High + Previous Low + Previous Close) / 3

The basis of daily pivots is to determine the support and resistance levels on the chart and identify the entry and exit points. This can be done by the following formulae:

R1 = (P x 2) – L S1 = (P x 2) – H R2 = P + (H - L) = P + (R1 - S1) S2 = P - (H - L) = P - (R1 - S1)

where:

P - Pivot Point

L - Previous Low

H - Previous High

R1 - Resistance Level 1

S1 - Support Level 1

R2 - Resistance Level 2

S2 - Support Level 2

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Momentum Trading Strategy

Momentum trading is actually based on finding the strongest security which is also likely to trade higher.It is based on the concept that the existing trend is likely to continue rather than reverse.

A trader following this strategy is likely to buy a currency which has shown an upward trend and sell a currency which has shown a downtrend. Thus, unlike daily pivots traders, who buy low and sell high, momentum traders buy high and sell higher.

Momentum traders use different technical indicators, like MACD, RSI, momentum oscillator to determine the currency price movement and decide what position to take. They also consider news and heavy volume to make right trading decisions. Momentum trading requires subscribing to news services and monitoring price alerts to continue making profit.

According to a well known financial analyst Larry Light, momentum strategies can help investors beat the market and avoid crashes, when coupled with trend-following, which focuses only on stocks that are gaining.

Carry Trade Strategy

Carry trade is a strategy through which a trader borrows a currency in a low interest country, converts it into a currency in a high interest rate country and invests it in high grade debt securities of that country.

Investors who follow this strategy borrow money at a low interest rate to invest in a security that is expected to provide higher return.

Carry trade allows to make a profit from the non-volatile and stable market, since here it rather matters the difference between the interest rates of currencies; the higher the difference, the greater the profit. While deciding what currencies to trade by this strategy you should consider the expected changes in the interest rates of particular currencies.

The principle is simple- buy a currency whose interest rate is expected to go up and sell the currency whose interest rate is expected to go down.

However, this does not mean that the price changes between the currencies are absolutely unimportant. Thus, you can invest in a currency because of its high interest rate, but if the currency price drops and you close the trade, you may find that even though you have profited from the interest rate you have also lost from the trade because of the difference in the buy/sell price. Therefore, carry trade is mostly suitable for trendless or sideways market, when the price movement is expected to remain the same for some time.

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Forex Hedging Strategy

Hedging is generally understood as a strategy which protects investors from occurrence of events which can cause certain losses.

The idea behind currency hedging is to buy a currency and sell another in the hope that the losses on one trade will be offset by the profits made on another trade. This strategy works most efficiently when the currencies are negatively correlated.

Thus, you should buy a second security aside from the one you already own in order to hedge it once it moves in an unexpected direction. This strategy, unlike most trading strategies already discussed, is not used to make a profit; it rather aims to reduce the risk and uncertainty.

It is considered a certain type of strategy whose sole purpose is to mitigate the risk and enhance the winning possibilities.

As an example we can take some currency pairs and try to create a hedge. Let’s say that at a specific time frame the US dollar is strong, and some currency pairs including USD show different values. Like, GBP/USD is down by 0.60%, JPY/USD is down by 0.75% and EUR/USD is down by 0.30% . As a directional trade we had better take the EUR/USD pair which is down the least and therefore shows that if the market direction changes, it will go higher more than the other pairs.

After buying the EUR/USD pair we need to choose a currency pair that can serve as a hedge. Again we should look at the currency values and choose the one which shows the most comparative weakness. In our example it was JPY, and EUR/JPY would be a good choice. Thus, we can hedge our trade buying EUR/USD and selling EUR/JPY.

What is more important to note in currency hedging is that risk reduction always means profit reduction, herein, hedging strategy does not guarantee huge profits, rather it can hedge your investment and help you escape losses or at least reduce its extent. However, if developed properly, currency hedging strategy can result in profits for both trades.

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Portfolio / Basket Trading Strategy

Portfolio trading, which can also be called basket trading, is based on the combination of different assets belonging to different financial markets (Forex, stock, futures, etc.).

The concept behind portfolio trading is diversification, one of the most popular means of risk reduction. By a smart asset allocation traders protect themselves from market volatility, reduce the risk extent and keep the profit balance.

It’s very important to create a diversified portfolio to reach your trading goal. Otherwise, this kind of strategy will be aimless.

You should compile your portfolio with such securities (currencies, stocks, commodities, indices) which are not strictly correlated, meaning that their returns do not move up and down in a perfect unison. By mixing up different assets in your portfolio which are in negative correlation, with one security’s price going up and the other’s going down you can keep the portfolio’s balance, hence preserving your profit and reducing the risk.

Currently IFC Markets provides Personal Composite Instrument (PCI) creation and trading technology based on GeWorko Method, which makes it even much easier to perform portfolio trading. The technology allows to create portfolios starting with only two assets and include up to tens of different financial instruments, open both long and short positions within a portfolio, view the assets’ price history stretching up to 40 years, create your own PCIs, use a wide variety of market analysis tools, apply different trading strategies and constantly optimize and rebalance your investment portfolio. In other words, GeWorko Method is a solution that lets you develop and apply strategies which suit best your preferences.

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Buy and Hold Strategy

Buy and hold strategy is a type of investment and trading when a trader buys the security and holds it for a long time.

A trader who employs buy and hold investment strategy is not interested in short-term price movements and technical indicators. Actually, this strategy is mostly used by stock traders; however some Forex traders also use it, referring to it as a particular method of passive investment. They commonly rely on fundamental analysis rather than technical charts and indicators. This already depends on the type of investor to decide how to apply this strategy.

A passive investor would watch the fundamental factors, like inflation and unemployment rates of the country whose currency he has invested in, or would rely on the analysis of the company whose stock he owns, considering that company’s growth strategy, the quality of its products, etc.

For an active investor it would be more effective to apply technical analysis or other mathematical measures to decide whether to buy or sell.

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Spread / Pair Trading Strategy

Pair trading (spread trading) is the simultaneous buying and selling of two financial instruments related to each other. The difference of the price changes of these two instruments makes the trading profit or loss.

By this strategy traders meanwhile open two equal and directly opposite positions which can compensate each other keeping the trading balance.

Spread trading can be of two types: intra-market and inter-commodity spreads. In the first case traders can open long and short positions on the same underlying asset trading in different forms (e.g. in spot and futures markets) and on different exchanges, while in the second case they open long and short positions on different assets which are related to each other, like gold and silver.

In spread trading it’s important to see how related the securities are and not to predict the market movement. It is important to find related trading instruments with a noticeable price gap to keep the positive balance between risk and reward.

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Swing Trading Strategy

Swing trading is the strategy by which traders hold the asset within one to several days waiting to make a profit from price changes or so called “swings”.

A swing trading position is actually held longer than a day trading position and shorter than a buy-and-hold trading position, which can be hold even for years.

Swing traders use a set of mathematically based rules to eliminate the emotional aspect of trading and make an intensive analysis. They can create a trading system using both technical and fundamental analyses to determine the buy and sell points. If in some strategies market trend is not of primary importance, in swing trade it’s the first factor to consider.

The followers of this strategy trade with the primary trend of the chart and believe in the “Trend is your friend” concept. If the currency is in an uptrend swing traders go long, that is, buy it. But if the currency is in a downtrend, they go short- sell the currency. Often the trend is not clear-cut, it is sideways-neither bullish, nor bearish. In such cases the currency price moves in a predictable pattern between support and resistance levels. The swing trading opportunity here will be the opening of a long position near the support level and opening a short position near the resistance level.

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Forex Strategies Based on Trading Order Types

Order trading helps traders to enter or exit a position at the most suitable moment by using different orders including market orders, pending orders, limit orders, stop orders, stop loss orders and OCO orders.

Currently, advanced trading platforms provide various types of orders in trading which are not simply ''buy button'' and ''sell button''. Each type of trading order can represent a specific strategy. It's important to know when and how to trade and which order to use in a given situation in order to develop the right order strategy.

The most popular Forex orders that a trader can apply in his trade are:

Market orders - a market order is placed to instruct the trader to buy or to sell at the best price available. The entry interfaces of market order usually have only ''buy'' and ''sell'' options which make it quick and easy to use.

Pending Orders – pending orders which are usually available in six types allow traders to buy or sell securities at a previously specified price. The pending orders-buy limit, sell limit, buy stop, sell stop, buy stop limit and sell stop limit- are placed to execute a trade once the price reaches the specified level.

Limit Orders- a limit order instructs the trader to buy or sell the asset at a specified price. This means that first of all the trader should specify the desired buy and sell prices. The buy limit order instructs him to buy at the specified price or lower. And the sell limit order instructs to sell at the specified price or even higher. Once the price reaches the specified price, the limit order will be filled.

Stop orders-a sell stop order or buy stop order is executed after the stop level, the specified price level, has been reached. The buy stop order is placed above the market and the sell stop order is set below the market.

Stop loss orders - a stop loss order is set to limit the risk of trade. It is placed at the specified price level beyond which a trader doesn't want or is not ready to risk his money. For a long position you should set the stop loss order below the entry point which will protect you against market drops. Whereas, for a short position place the order above the trade entry to be protected against market rises.

OCO – OCO (one-cancels-the-other) represents a combination of two pending orders which are placed to open a position at prices different from the current market price. If one of them is executed the other will automatically be canceled.

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Algorithmic Trading Strategies

Algorithmic trading, also known as automated Forex trading, is a particular way of trading based on a computer program which helps to determine whether to buy or sell the currency pair at a specific time frame.

This kind of computer program works by a set of signals derived from technical analysis. Traders program their trade by instructing the software what signals to search for and how to interpret them.

High-grade platforms include complementary platforms which give an opportunity of algorithmic trading. Such advanced platforms through which traders can perform algorithmic trading are NetTradeX and MetaTrader 4.

NetTradeX trading platform besides its main functions, provides automated trading by NetTradeX Advisors. The latter is a secondary platform which contributes to automated trading and enhances the main platform’s functionality by the NTL+ (NetTradeX Language). This secondary platform also allows to perform basic trading operations in a "manual" mode, like opening and closing positions, placing orders and using technical analysis tools.

MetaTrader 4 trading platform also gives a possibility to execute algorithmic trading through an integrated program language MQL4. On this platform traders can create automatic trading robots, calledAdvisors, and their own indicators. All the functions of creating advisors, including debugging, testing, optimization and program compilation are performed and activated in MT4 Meta-Editor.

The Forex trading strategy by robots and programs is developed mainly to avoid the emotional component of trade, as it is thought that the psychological aspect prevents to trade reasonably and mostly has a negative impact on trade.

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