Forex Intraday Trading Strategies
The foreign exchange (Forex) market is the highest volume and most liquid speculative market in the world. Over $4 trillion in Forex currency exchanges take place daily, according to the Baby Pips website. Because of its virtual 24-hour-a-day marketplace and high liquidity, day traders are attracted to Forex for regular, or full-time investing. Forex is risky, with traders sometimes losing everything they invest. The most successful day traders implement sound intraday trading strategies.
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Five-Minute Strategy
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Intraday Forex strategies often are built on following narrow time-frame patterns on technical charts. The five-minute intraday strategy, outlined by the Forextac website and credited to veteran trader Phillip Nell, is built on the premise of closing monitoring chart patterns on a five-minute chart. The website notes that to apply the strategy, you need to plot a 50 simple moving average (SMA), 21 exponential moving average (EMA) and 10 EMA. According to Nell's strategy, "Open (your) position when the angle of the 50 simple moving averages are greater than 20 degrees and the price retrace back into the zone of the 21 exponential moving average and the 10 exponential moving average." The turnaround is quick, as you set a stop-loss at six to eight pips and take profit at eight to 10 pips.
The Momentum Box
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Chris Capre of Trading Markets outlines a distinctive approach to momentum trading, which he labels "The Momentum Box." Momentum trading is a popular reference to a day trading philosophy of catching on with momentum of currency pairs that make a swift move in one direction or another. Capre's strategy involves identifying pairs that are trading in a tight range, or box, and picking up on momentum carrying the pair in one direction or another. He plots SMA and EMA indicators and tries to identify a breakout when momentum is building. Once you enter a position as momentum builds, you set a right stop-loss order in case your projection is wrong.
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Divergence and Pivot Levels
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Kevin Barry outlines a five-minute chart trading strategy on Meta Stock Tools, in which he explains the use of moving average convergence-divergence (MACD) histogram divergence signals and pivot levels to identify quick entry and profit opportunities. The approach is based on conventional intraday pivot levels from the previous day's high or low. However, he relies on midpoints for support and resistance that are between the standard pivot points. Barry states, "I use a binary BB indicator and pivot levels, together with specific candlestick formations and MACD divergence for confirmation, for my trade entry." He sets his stop-loss just above or below his anticipated point of reversal.
Trade the GBP-USD Trend
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Following the trend is a commonly expressed piece of advice in any trading, but it is especially useful in intraday Forex trading. When entering and exiting positions intraday, it makes little sense to go against the longer term trend. The website Forex-Uncovered advocates that new or more conservative intraday Forex traders focus especially on the British Pound-USD Dollar (GBP-USD), as this currency pair typically follows the most consistent trend patterns. In theory, this makes entering positions at support and resistant levels and taking a modest profit simpler.
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