The word trader has become so closely tied with a forex trader that most of the traders that you actually see on social media are mostly forex traders. So in a market as so full of traders as the forex market, how can you stand out?
In simpler words, how can you take your forex trading to the next level?
That is exactly what we are going to talk about in this article. There are so many different techniques and trading strategies that can be found in this market. But the aim of this article is going to be something a little different. We are not just going to give you a list of trading strategies. We are going to present you with a list of advanced trading strategies.
So if you want to find out how experienced traders in forex earn their profits, stick around and keep reading to find out these strategies.
What Makes a Strategy an Advanced Strategy?
Before we go directly to the strategies themselves, we need to first talk about advanced strategies.
What makes a forex trading strategy an advanced strategy?
Are experienced and advanced traders using some sort of secret technique that other traders don’t know about?
You know, it is fun to think that there is some sort of secretive technique out there that if you learn you can start making profits like never before. But the truth is that trading is not about a single secret strategy that others don’t know about.
In fact, as you will see in the following list of trading strategies, these so-called advanced strategies are pretty much all the same as the major trading strategies that you might even already be using.
What actually makes a strategy an advanced one is how it is used.
So in this article we want to give you the best trading strategies and also show you how you can use even the most well-known strategy in an advanced way.
1. Price Action Trading
We are going to start the list with price action trading. This is kind of a trading technique that relies on the intuition of the trader rather than analysis.
This means price action trading needs a really experienced and expert trader. Because in this type of trading, the decisions are only made based on the price movements that are seen in the market and without using technical analysis.
The advantage of this forex trading strategy is that highly skilled traders can just focus on the market and make decisions without the need to execute various kinds of analysis. This will also give them the chance to trade much faster.
Price action traders rely on certain concepts for their trading decisions. These are such concepts.
Key Concepts in Price Action Trading:
- Support and Resistance: these two lines are among the most fundamental and widely-used concepts in this type of trading. They can help you make more reliable decisions based on price action. As you know support is the lowest price a forex pair can fall before bouncing back up. And on the other hand, resistance is the highest it can go before falling back again.
- Candlestick Patterns: it is also known that price action traders will use candlestick charts instead of other forms of charts. This is because candle charts provide precise information of price action and therefore they are excellent for this type of trading.
- Trendlines: one of the best techniques in price action trading is using trendlines. Expert traders will transpose these lines right onto the chart so that it can help them make better decisions with regard to price movements.
2. Swing Trading
This is one of the most commonly used trading strategies across all sorts of different markets. This is one of those well-known strategies that here we want to show you how to do like a pro.
So swing trading itself is basically a short to medium-term strategy. The timeframe that we mentioned refers to how long you keep the positions open in this method. In swing trading positions are usually kept for days or at most weeks.
Sounds simple, right? Well, it is not that simple.
The key to swing trading is not just to open any position and keep it open for that long of time and then hope for profits. There are twists and turns into how you should calculate the position. This is what makes a trader professional. You need to know when to enter and exactly when to exit.
You should be aware of short term movements. Such price actions that do not last for long can be a trick sign to get you to enter and maybe even to pressure you to exit.
This is why it takes an experienced hand to execute swing trading properly.
To help you better find the point for entry and the proper time to exit a swing position, the following tools can be helpful.
Tools for Swing Trading:
- Chart Patterns: there are certain chart patterns that are particularly useful to identify future price actions. These patterns include head and shoulders and also triangles. These can be useful tools in swing trading methods.
- Technical Indicators: aside from patterns, there are certain technical indicators that are also useful for swing trading. Indicators such as the relative strength index or RSI and also various moving averages can help you find overbought and oversold conditions in the market. This is useful because it can help you predict a potential reversal and protect your swing positions.
3. Carry Trading
This one is specifically for experienced forex traders.
This technique is known as carry trading. In this method of trading the foreign exchange trader would borrow money in a currency that has a lower interest rate. And then they would use that money to buy a second currency which has a higher interest rate.
The point in carry trading is to profit from the difference between the interest rates of the two mentioned currencies.
So as a carry trader you hope to gain profit from this difference. But only this and no other factors. This means in order for carry trading to be successful, there needs to be little volatility. If the volatility is high and the market is not stable, then it can be too risky for carry trading.
Key Considerations in Carry Trading:
- Interest Rate Differentials: remember that the whole idea in carry trading is to benefit from the difference between the interest rates of two currencies. So in order to gain more profit is to pick currencies that have a bigger difference in interest rates.
- Currency Risk: an important factor in carry trading is that the risk can be high sometimes. This is because even though you can simply profit by borrowing a currency, buying another one and holding it, at the same time fluctuations in the value of either currency in the process can impact the end result.
4. Scalping
Here we have another quite well-known or perhaps the most well-known trading strategy. Yes, the good old scalping.
But again we have to mention that while even less experienced traders might use scalping as their trading strategy, the point here is to use this strategy in an advanced manner.
And if you think about it, scalping is truly one of those trading strategies that requires a skilled and experienced hand to successfully execute.
Why?
Well, because of the nature of scalping. As you know, scalping is always going on. It means it is fast paced and works within very small time windows. So there is very little room for mistakes and bad judgement. You have to be quick, precise, accurate, and make reliable decisions.
Professional scalpers can use this advanced method sustainably and be profitable in an extended time period. Of course there are many different tools that can help you and that you should use in this regard.
Key Tools for Scalping:
- Order Flow: this is an interesting type of analysis that experienced traders do in scalp trading. They analyze the order flow. This will help them find out the flow of orders in the market. It means you can find out about the supply and demand for a currency pair. This is hugely important because supply and demand directly plays into volatility and fluctuations, both of which play an important role in scalping.
- Technical Indicators: of course you cannot forget about those indicators. These are like the bread and butter of any professional trader. There are many different indicators that can help traders with scalping, such as the Bollinger Bands or even the RSI, which can help with important factors such as volatility, overbought, and oversold conditions.
5. Trend Following
This is another rather genius strategy. Why genius? Well, because it is really simple.
But don’t be fooled by its simplicity. It is still difficult and challenging to execute properly.
First of all, what is it? As the name suggests, trend following is a trading strategy whereby the trader would identify a trend in the market and then trade along that trend.
You basically follow the trend and go where it goes. You trade based on that. Of course the key technique here is to know how long the trend will last and when it will possibly reverse.
These two concepts are critical in trend following.
So, experienced traders who are using this advanced technique need to use any tools or method possible in order to help them identify the strength of a trend in the market and also to be able to predict if and when the trend is going to reverse.
Key Tools for Trend Following:
- Moving Averages: while these tools and indicators are simple, they are great for finding out the general and overall patterns in the market. This is especially the case if you use longer periods for the average, such as 50 or even 200-period moving averages.
- ADX (Average Directional Index): there are technical indicators such as the average directional index which can help traders specifically find the strength of a trend. This is extremely important in trend following trading strategy.
Conclusion
The foreign exchange market or forex is a complex and dynamic financial venue with countless traders. It takes a lot to be successful and profitable in this market. There are many different techniques and methods available for this purpose. In this article we discussed some of the most practical and advanced trading strategies that experienced traders use. Some of these techniques as you saw were among common practices and strategies. The difference that makes them advanced is how experienced traders use them.