When you start trading on the forex market you are told to determine the timeframe that you are comfortable trading in. Once you have selected this you are told that you should be using one of the forex strategies that fall into this timeframe. If you have determined that short-term trading is the right timeframe for you, you need to know how to choose the short-term strategy to use. There are a number of short-term forex strategies that you can consider.
The Short-Term Forex Strategies
In order to choose the right strategy for you, you need to know what the short-term forex strategies are. There are two common short-term strategies that you should consider and they are trend and scalping. Some traders do have a range strategy that they use in the short-term and you should consider this.
The Short-Term Range Strategy
The forex market moves through two different conditions and they are trend and range. When you use a range strategy you are going to be looking to hold the trade position for a number of hours. It is very rare that a range in the market lasts for less than a few hours. To determine if the market is ranging you should look at the support and resistance levels. If the price movements are within these levels then you are looking at a range market.
There are a number of different range strategies that you can use on the market. There are also a number of different analysis methods and indicators that you can use for range trading. The most common is to use technical analysis with Bollinger Bands or support and resistance levels.
The Short-Term Trend Strategy
Most day traders will have a trend strategy that they use on the forex market. To use this strategy you are going to be looking at the intra-day trends. You should not look at any trends that are longer than this. When you look at the longer trends you are going to be seeing a slower increase or decrease in prices. The profits that you are able to make will not be the same or quite as high.
You can find these trends in two different ways. The most common with through technical analysis and the less common is through fundamental analysis. If you are going to use fundamental analysis you have to know which news releases to look for. Different forex strategies will use different levels of impact.
The Use of Scalping
Scalping is a short-term strategy that is not recommended to new traders and that many forex brokers frown on. When you scalp the market you are going to be skimming small profits from the movements. It is possible to use scalping at any time on the market as long as you have a broker that allows this. The amount you make per trade will vary from 10 to 20 pips. If you are looking at profits smaller than 10 pips you are generally going to be completing guerrilla trading which is a form of scalping. You have to be careful with scalping as the risks are high due to the fast-paced nature of the strategy.