Basic Forex strategies

10 Basic Forex strategies

In this article you will discover 10 strategies or basic tips that you should follow to succeed by trading in the Forex currency market:

1. Plotting trends and ranges of prices of the markets

It is recommended to use graphics with long term time frames to decide between trends or fluctuating markets. Start the analysis charts daily, weekly, monthly, or even, whereas several previous years. A graphic large scale essentially shows the life of the market and provides a much clearer perspective of long term of the market situation.

Once you have analyzed the situation of the long-term market, you can parse the graphics with short-term time frames. Remember that the factor of chance in Forex is much higher the smaller the time frame (time frame) in a chart. Successfully predict the behavior of the price in short-term time frames is much more complicated. It is usually best to operate in the same direction as the trends in the medium and long term, even if only operated in the short term. If there is a strong and definite trend, it is best to switch to other types of strategy.

2. Follow the trend

Once determined the trend, you should only open positions in the same direction. The market trends can be long, medium or short term.

You must first decide what kind of strategy to follow: long time or less time. This decision will determine the type of graphics you should use. But the strategy will be to always follow the trend.

In case of an uptrend, regressions in the price are expected to buy the pair, to ensure a good entry price. In the event of a downward trend, we shall wait for a recovery in the price, before selling.

3. Locate the support and resistance levels

Find support and resistance levels. It is best to buy close to the levels of support and sell near resistance levels. The level of resistance is usually a peak reached earlier by the price of the currency pair.

When resistance is finally broken to the upside, it is automatically converted to a support. Also when a bracket is broken down, this becomes in turn a resistance.

4. The setbacks or corrections

Correction of the market, up or down, usually through an important part of the previous trend. Corrections in a trend in simple percentages can be measured. A trace of fifty per cent of a previous trend is the most common. The Fibonacci retracement of 38% and 62% are also two levels more followed by Forex traders, including investors who operate large volumes, such as banks or financial institutions.

5. The trend lines

One of the simplest and most effective graphical tools is the trend lines. Draw a straight line joining two points on the graph. If the trend is bullish, the line is drawn below by joining two or more low points.

If the trend is bearish, it draws a line above the graph also joining two or more high points. Prices often respect these trend lines approaching them.

When a trend line is broken, often this is indicative of a general trend change.

6. Moving averages

Moving averages often offer signals of purchase and sale, reason why it is important to take them into account. With the help of moving averages, it is possible to determine the status of a current trend.

One of the most common ways to use moving averages is the use of two different socks in a same graph, and waits for the crossing of both. If for example we have a bullish and prices were in a correction, at the time when a faster moving average (of 10 days for example) cross over to above a moving average more slowly (20 days for example), this is probably a good buy signal.

7. The oscillators

Oscillators help identify markets in a State of overbought or oversold. Although moving averages provide a confirmation of the trend of the market, oscillators can often tell us the right time to open an operation.

Two of the most common oscillators are the index of relative strength (RSI) and stochastic. These two oscillators operate on a scale from 0 to 100. When the RSI is above 70, there is an effect of envelope buys, and when it is below 30, is indicative of oversold. The values of overbought / oversold for stochastic are of 80 and 20 respectively.

One of the most useful signals that provide the oscillators are famous divergences. A divergence occurs when the direction of the oscillator signal differs with the direction of the price. Such situations are usually a strong indication of a change in the market trend.

8. The MACD

Indicator of convergence / divergence of the mobile average (MACD) combines a system of intersection of moving averages with mobile elements of overbought / oversold an oscillator. A buy signal occurs when the faster line crosses up slower, still both below zero line.

On the other hand, a signal occurs when the faster line crosses down the slower, still both above zero line.

The MACD histogram determines the difference between the two lines and gives an early warning of changes in the trend. A histogram is this called since it uses vertical bars to show the difference between the two lines.

9. The ADX

The Average Directional Index (ADX) helps to determine whether a market is in a phase of trend or if it is oscillating between ranges. This tool measures the strength of a trend or direction of the market, but does not indicate the same direction. Other indicators or tools should be used for that. A reading above 25 is usually an indication that the market is in a strong tendency, rather than fluctuating between ranges.

10. Form is

Training in technical analysis is something essential that all beginner traders must make. You can only improve and refine through practice and experience operating in the market. Continue reading, training and practice is very important for finding the strategies that work best to each person.

Remember that follow strategies based on technical analysis also helps prevent to open operations based purely on emotions and impulses. Discipline is essential to achieve this.

We hope that you will you help this material and feel free to send us your comments or opinions and share these tips on social networks.