What are the best currency trading strategies that work in 2020? Uncover the best forex online currency trading strategies, including day trading, swing trading, scalping, and more. Additionally, we’re going to share a few important recommendations that experts use before entering a trade.
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This is probably going to be one of the best trading guides you'll ever read. You're going to learn what the best foreign currency traders do on a daily basis to survive in the $5.1 trillion markets. If you’re new to the forex market, you'll first need to learn what the forex market is. Read this guide: Forex Trading for Beginners.
There are several different types of currency trading strategies that you can use.
The most important thing is knowing which online currency trading system to use. I.e. - scalping, day trading, swing trading, or position trading.
We have all tried to incorporate currency trading strategies used by pro traders, but as soon as you open your first trade the strategy stops working.
Moving forward, we’re going to share with you some currency trading strategies that actually work. Let’s get started.
Currency Trading Strategies That Work
This guide to online currency trading will answer:
- What is currency trading?
- How does currency trading work?
- What are the best strategies?
- And much more.
Check out the ultimate guide to forex currency trading HERE.
Now, before you attempt to trade any currency pairs, let's have a small trading quiz with the most asked trading questions.
The first question is related to the main reason why people are attracted to online currency trading.
Is Currency Trading Profitable?
The short answer is a big YES. If you have a trading edge you can make a profit from forex trading.
Skilled currency traders can make 6 to 7 figures a year.
As our friend Adam Khoo helps explain, there are many things you can do to become a successful forex trader.
However, to become a 7-figure Forex trader, you need the best currency trading system and the discipline to follow your trading rules. While Forex trading can make you rich, don’t expect any success to happen overnight.
On the flip side, online currency trading carries a lot of risks, which brings us to the next question.
Is currency trading worth the risk?
The short answer to this question is YES and NO. It really depends on a case-by-case basis and your financial well-being. Trading leveraged products such as currency pairs come with an inherent risk, which can result in losing all your trading funds.
Currency trading is only worth the risk if you’re able to do two things:
- Develop a winning Forex currency trading system that has backtested profitability.
- Control the risk with proper risk management techniques.
Now you might wonder how to get your feet wet, which brings us to the next question.
What Are the Best Ways to Trade Currency Online?
The short answer is that there are no one-size-fits-all foreign currency trading strategies.
Currency traders have different personalities and they come in all shapes and sizes. If you don’t have the patience to ride the long-term trends, day trading currency strategies will be more favorable to your personality type.
Now that you have an idea of how to match your strategy to your personality type, we’re going to share a few foreign currency trading tips for beginners.
Let’s get started…
Currency Trading Strategies for Beginners
As a beginner, there are countless currency trading strategies that you can adopt. However, depending on the time frame used, we can distinguish 4 types of currency trading strategies that work:
- Day Trading Currency Strategy
- Swing Trading Strategy
- Positional Trading Strategy
- Trend Trading Strategy
1. Day Trading Currency Strategies
Day trading is a short-term trading strategy that involves buying and selling currencies within the same trading day. The key to making consistent money with day trading is knowing which currency pair to trade and which to avoid.
So, you might be asking yourself:
What are the best currencies for day trading?
The currency pairs that are best for day trading need to have high liquidity and volatility. Some pairs are more volatile than others.
There are quite a few reasons why forex traders lose money. But, by using these carefully designed strategies, you can protect yourself from these risks.
Currency Trading Recommendations #1: Use the ATR to gauge the currency volatility. If you’re looking to profit 30 pips per day, make sure the currency pair traded has the ATR two times greater than your desired target.
The GBP/USD chart below reveals that the pair has an average true range of 90 pips, which increases our chances to meet our target.
Learn how to day trade online with our Day Trading for Dummies Guide.
The main advantage with day trading is that you eliminate the risk linked to overnight price movements. The best currency to trade at night if you’re a US-based trader is the GBP crosses during the London session.
On the other hand, the main disadvantage of day trading currency is that you need to monitor the currency market constantly. It’s only suitable for full-time traders.
Now, if day trading is not for you, let’s find out if the positional trading strategy is best for you.
2. Position Currency Trading Strategies
Position trading is a long-term trading approach that involves buying and holding mentality. Currency traders will implement this strategy off of the daily and weekly charts.
Compared to day trading currency, position trading can reward you higher profits. However, higher profits also involve taking a greater risk.
To establish your position you can use a combination of:
- Currency trading fundamentals to establish the currency's direction.
- Currency trading indicators to time the market.
After you analyzed the currency trading fundamentals for the GBP/USD pair, you determined it’s bullish. Next, you wait for your favorite forex trading indicators to trigger a trade.
See the GBP/USD chart below:
The advantage of this Forex currency trading system is that it’s not time-consuming and can be done part-time.
Check out how to profit from the long-term trends here: Positional Trading Strategy – Trade like a Hedge Fund Manager.
Now, the next approach requires following the trend, which will increase the chance of success.
3. Trend Following Currency Trading Strategies
As the name suggests this strategy involves analyzing the market technicals to determine if the market is in a bullish or bearish and following that trend.
Trend trading can be done on intraday time frames as well as longer time frames.
The currency market has a tendency to exhibit long-term trends due to the different types of monetary policies enacted by different central banks.
See below an example:
You can score big profits if you manage to enter right from the start of a trend.
If you don’t know how to do that, don’t worry, you can learn how to spot trend trading signals with our strategy: Trend Trading Strategies - The Right Side of The Market.
Now, if the trend following strategy is too slow for you, then the final strategy can be placed in-between day trading and trend trading.
4. Swing Currency Trading Strategies
Swing trading is a style of trading that focuses to catch the ebb and flow movement in the price.
Traders will look to capitalize on the short-term price momentum by using currency trading indicators like moving averages, oscillators, momentum indicators, etc. The main advantage that comes with swing trading is that you can take advantage of the price movements against the overall trend.
See an example below:
Check out how Jesse Livermore, one of the greatest traders who ever lived made money with swing trading: Swing Trading Strategies that Work.
To work out which currency trading strategies to use consider your own personality.
If you’re a quick thinker, day trading might be more fitted for you. On the other hand, if you’re slow at making decisions, a long-term approach like trend following might be more fitting.
Now, if you’re an old dog in the currency space and you already know the currency trading strategies that work, we have some currency trading recommendations up our sleeves.
Currency Trading Recommendations
In this section, we’re going to outline 3 concepts that make up the best currency trading system. These 3 currency trading recommendations are the building blocks of the best currency trading strategies that work.
Don’t look for any shortcuts because there is no Holy Grail or magic formula for success. According to Bloomberg, the forex market experiences more than $6.6 trillion in daily volume. Some people will make a lot of money. But you need to be careful.
So where do you start? Here’s the breakdown…
Currency Trading Recommendation #1 – Pick a Currency Pair
The first building block is to pick one currency pair and master it. Don’t be a Jack of all trades, master of none.
A lot of old top floor traders were profitable because they became experts in trading one market.
Nowadays, names like Paul Tudor Jones, Michael Marcus, or Bruce Kovner are billionaire hedge fund managers. And, they all started by mastering one single market.
Choose your favorite currency pair and master it if you want to achieve consistency.
The next pillar…
Currency Trading Recommendation #2 – Entry Technique
The second building block is to know when to enter the market.
While knowing when to exit the market is important, proper timing of the currency market literally helps you preserve your capital.
When you nail down your entry technique you’re on your way to mastering the market.
Let’s now finish with the last pillar of your currency trading strategy.
Currency Trading Recommendation #3 – Risk Management
Even the best currency trading strategies that work can fail without proper risk management.
Proper risk management techniques will help you preserve your capital. With no risk management strategies, you’re simply playing with fire.
Learn the forex risk management basics with our FX risk management trading PDF.
Final Words - Currency Trading Strategies that Work
The best currency trading strategies that work are the ones that fit your personality. Don’t try to day trade the market if you’re not quick at taking fast decisions under pressure. On the same note, don’t try to use trend following strategies if you’re an impatient trader.
If you want to be a profitable currency trader you need to be willing to put that extra effort needed to beat the market. Follow our currency trading recommendations and we guarantee that you’ll see improvements on your first trading day.
Also, be sure to check out our currency strength indicator seen here:
Now you have three critical building blocks that will help you improve your own skills. Learn to master one currency pair and you will soon master the entire currency market.
Thank you for reading!
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