Professional Forex traders have their own set of strategies which they have developed over years of trading in the markets. However, we as beginners often have to rely on off-the-shelf or internet freebies to work our way out through the markets. The trouble with free Forex trading strategies is that most of the time they haven’t been tested or if they actually are there is very little evidence of their reliability.
However, there are a few Forex trading techniques that have proven their worth over time and are known to have minimum chances of failure, if applied accurately. Some of the most useful Forex trading techniques are mentioned below:
1. Hedging: Hedging is a way to reduce the risk by taking both sides of the trade simultaneously. In simple words, you need to go long as well as short on the same pair. As a result no matter in which way the pair moves, you will both earn and lose the money and will almost even out. Professional traders use this technique to cover up their initial trades, when they feel that the market might move against them.
2. Position Trading: This strategy involves trading based on your overall exposure to a currency pair. Your initial position acts as your average price for any particular currency pair. For Example, you have taken a short trade on EUR/USD at 1.20. If the pair is ultimately trending lower, but happens to gain strength and retrace up then you simply take another short position at say 1.22, now your average position would be 1.21. Once the EUR/USD drops back below 1.21, you will overall be in profit.
3. Options: This is another hedging technique used by many professional traders. It provides you with the freedom to purchase (call) or sell (put) a currency pair at a pre-determined price at a specified time and for a specified duration. For example, you believe that the USD/EUR rate is going to shoot up due to some fundamental reason from 0.8 to 0.9. In such a scenario you can buy a call option on the USD/EUR pair so that you can gain profits if the rate actually moves as per your expectation.
Even though there are hundreds of strategies available on the internet, the above mentioned techniques are time-tested by many professionals and are ideal for any beginner. Mastering them before venturing into other complicated techniques would be a wise attempt in your journey of becoming a successful trader.