Exploring Trading Strategies

Highs as the Initial Signal
When designing a trading strategy, there are many opportunities available. First, most reasonably powerful software titles allow for the construction of rule signal generation and enable the creation of custom requirement systematics. Complexity is not, however, best in forex trading for the newbie trader. A simple structured approach offers less experienced traders the opportunity to get an feel for the fastest market in the world without delving too deep into all data available.

A proven strategy is the trading of highs in a trend. It can be short-term intra-day highs traded as well as medium-term price brands and all-time highs. Histoically, there is a relatively high probability that a market, after breaking a previous high, develops farther upwards. Stop-buy orders can be read on the last high entry classes which are defined automatically when they reach an open position. The order ticket is also a stop-loss, which is just below the last high.

The particular appeal of this strategy lies in it’s very simple implementation, without much time or knowledge of technical analysis neede for it to be executed. Depending on the time of the scheme, many signals can be generated. The intra-day range should be included in the largest currency pairs if enough trading opportunities are available. Position trades need to wait longer for entry signals and are therefore more informed trades, in addition to the euro, dollar and yen, there is the Swiss franc and British pound to watch. Another important advantage for traders who trade exclusively in new highs, lies in the simple definition of stop-loss marks.

This strategy certainly has it’s drawbacks, as with any strategy that exists, especially in volatile markets. The risk is that the price of a currency pair’s past high starts over again at the stop-loss threshold, just to drop before the actual upward momentum is seen.
Another problem lies in the occasional simultaneous or development of various currency pairs. In the worst case, two or even three closely correlated positions simultaneously open, thus a significant clustering in the trading account which is inadvertently too large, may result in losses.

News Trading
Another relatively easy to implement strategy is to anticipate future market movements in market relevant news. This is following the decisions and opinions of the banks on future monetary policies, data on the overall economic market, which employment, economic activity and theconsumer climate. Most news which is reportedis not spontaneous. Banks for example, hold regular press conferences and the dates of publication of almost all economic data is widely known weeks in advance. Most trading platforms offer access to a schedule and allow a quick overview of the trade news of the week.

Trading on the pulse or of the market is not free of risk. In some cases, the notification of important dates starts a movement up or down, and then rotates in the opposite direction to run. The consequences for the investors are dependent on whether the trade, located between the opening prices of the long and short position, does not stop-loss. Depending on the situation this can be a quite painful failure, this is why the use of exit levels is therefore recommended.

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