The chart above shows a representative day trading setup using moving averages to identify the trend which is long in this case as the price is above the MA lines (red and black). Entry positions are highlighted in blue with stop levels placed at the previous price break. Take profit levels will equate to the stop distance in the direction of the trend.
Sometimes a market breaks out of a range, moving below the support or above the resistance to start a trend. How does this happen? When support breaks down and a market moves to new lows, buyers begin to hold off. This is because buyers are constantly noticing cheaper prices being established and want to wait for a bottom to be reached. At the same time, there will be traders who are selling in panic or simply being forced out of their positions.
Economic data indicators and mood sentiment change often so stay informed by checking our forex economic calendar daily. FX currency pair movements happen quickly so get to know the daily and foreign exchange weekly economic calendar to anticipate market trends. Our real-time forex live news and analysis updates, commentary and articles can help you interpret the economic data news so you can take advantage of technical analysis patterns as they change with forex market sentiment. Stay familiar with the economic calendar and forex news from central banks, politics and local events that can affect country currency pairs you trade.
Some of the other best forex trading strategies are based on the technical analysis. This method is particularly important in day trading. Technical analysis is useful to traders in that it gives them an indication of times when they can enter or exit the market. It also helps the trader to make the most out of the existing market status. Given below are brief explanations of some of the technical analysis based trading strategies.
Day trading - These are trades that are exited before the end of the day, as the name suggests. This removes the chance of being adversely affected by large moves overnight. Day trading strategies are usually the perfect forex trading strategies for beginners. Trades may last only a few hours, and price bars on charts might typically be set to one or two minutes. The 50-pips a day forex strategy is a good example of a day trading strategy.
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The EUR/USD 10 minute above shows a typical example of a scalping strategy. The long-term trend is confirmed by the moving average (price above 200 MA). The smaller time frame is then used to target entry/exit points. Timing of entry points are featured by the red rectangle in the bias of the trader (long). Traders can also close long positions using the MACD when the MACD (blue line) crosses over the signal line (red line) highlighted by the blue rectangles.
The forex market is a very volatile market. When the market is volatile, traders get lessons on how to hedge, develop and acquire broad/diverse portfolios, and act on low leverage to exploit the prevailing market condition. There are two different types of volatility. They are historical and implied volatility. The former refers to the normal price action with respect to a period of time (say, a month or year). Abnormal current and future price action is referred to as implied volatility. It often exceeds the historical range when compared with the historical price action.