There are three kinds of markets in the foreign currency exchange (Forex) market that any good Forex trading strategy will include: up trending, down trending, and range bound.
To help your Forex trading strategy, you must learn these three markets. Up trends and down trends are simple to spot. 4-hour charts are recommended by Forex trading experts to spot these trends. To look for the trends, find a reliable 4-hour chart and utilize it. As soon as you've seen one, trade on a trend.
Range bound deals with shorter timeframes than the up and down trends of the 4-hour chart. Your Forex trading strategy needs to be adaptable. You cannot simply rely on 4-hour charts, so range bound will help you if you can't find trends on the 4-hour chart. Try looking at a smaller frame like a 30-minute frame and spot short-term trades and moves. This will give you trading choices when your charts are not showing trends, even though these small activities may only be 20-30 pips.
Also consider sitting out for a little bit as a Forex trading strategy. That is correct; if you want to, have a little break from the market. Stay out of the market for a while if you are not finding any trends on the 4-hour charts or feasible short-term activity or trades. Come back later when there are fresh 4-hour charts available and look to see if something has changed and if any new trends have come out.
Instead of specializing in just some pairs, it's best to have a system based on market indicators for these reasons:
- You can trade on various pairs utilizing these indicator sets and not only on one.
- You do not have to conduct large amounts of research. You use trade signals from your indicators instead if you apply indicators for your Forex trading strategy. You must research on what currencies and economies are doing if you don't have indicators. Research still has an essential role, but you are not trading exclusively relying on research; you are trading because of your buy and sell signals.
- You have broader trading capabilities. Many wish to trade just a few currency pairs. While they may specialize in some pairs and become successful with them, their Forex trading strategy is shallow. They cannot do trading in the market if these pairs aren't showing any trends or activity. If you trade based on indicators, you can use them and apply them to all pairs and you can always be finding trends to trade on. You can trade on all pairs and not just focus on some.