FOREX Technical Trading Strategies

FOREX technical trading success requires stict adherence to discipline trading approaches.

FOREX (or Forex) is the often used short name for the foreign exchange market, also known as currency trading. Forex is one of the largest investment exchange markets in the world, according to the Earn Forex article "What is FOREX?" Transactions are conducted in which traders exchange one currency for another. Some market participants simply want to trade once currency for another, others speculate based on anticipation of one currency gaining in value versus another.

Trading Strategies Overview

"Global macroeconomic conditions," anticipated news events, and actual monetary flow around the world are among key influencers in currency exchange markets, according to the Earn Forex article. Similar to other speculative markets, Forex has two basic trading approaches: Fundamental and Technical. Fundamental analysis involves monitoring of economic events and news and trying to trade based on what currencies should do, according to the Forex Trading USA article "Technical and Fundamental Analysis in the Forex Market." Technical trading is based on common technical measures applied to historical shorts either short-term, or long-term in nature.

Long-Term Trendlines

Long-term investors in currencies typically have several opportunities to enter and exit currency positions by identifying long-term trendlines, according to Deutsche Bank. Trendlines follow ascending or descending low points on a currency's historical chart to indicate the direction of the trend and the rate of increase or decline. Long-term traders attempt to get into a long or short currency position as early as possible when a long-term trend is clear. Buy against the trendline and put a stop-order slightly above or below the trendline for protection from a reversal.

Buy Fibonacci Breakouts

Fibonacci retracement levels are a long-utilized and common measure to identify key resistance and support on currency charts. The Fibonacci system indicates important points in directional price moves that if breached, can signal a stronger move in the trend direction, or if a failure to breach that resistance or support level takes place, a reversal can occur, according to the website Forex Traders. If you identify these key retracement points and plan a strategy to buy a breakout, or sell a reversal, you can get in before a strong directional move. Use stop orders to limit losses if you choose the wrong direction.

Short-Term Momentum

Momentum trading is a common day-trading strategy employed in various investment markets. Traders buy and sell positions within the same day and attempt to profit by buying wisely into an intraday trend.

By following movement on short-term price charts (10 to 15 minute intervals), you can identify short-term currency directions. The intersection of the "fast stochastic line" and "slow stochastic line," which can be applied in most basic online Forex technical charts, offers a glimpse of short-term momentum opportunities. According to the article "Forex Strategies: Short Term Strategy" on the site Learning to Invest, "When the fast stochastic line crosses above the slow stochastic line below 20 (for going long) or crosses below the slow stochastic line above 80 (for going short), short-term pullbacks or reversals are possible."

Trade with Discipline

Maintaining discipline with any technical trading strategy is of prime importance, according to Deutsche Bank. Currency price action is unpredictable and changes too quickly for disciplined trading to take place in the moment. Successful technical traders plan trades in advance by researching technical charts and identifying prime long or short entry opportunities. They only enter when these opportunities come about, and they plan exit (profit or loss prevention) strategies ahead of the entry.

References

• Earn Forex: What is FOREX?
• Forex Trading USA: Technical and Fundamental Analysis in the Forex Market
• Deutsche Bank: Forex Strategies - Technical Analysis
• Forex Traders: The Perils of Forex Backtesting --- How to Evaluate a Technical Forex Strategy
• Learning to Invest: Forex Strategies: Short Term Strategy
• Deutsche Bank: Top 10 Forex Trading Tips