Updated Jul 11, Updated Aug 24, Osikhotsali Momoh. Updated May 04, Caroline Banton. Updated Jun 03, Updated Dec 26, Updated Aug 09, Marshall Hargrave. Updated Nov 01, Updated Oct 31, Albert Phung. Updated Aug 05, Selwyn M. Updated Sep 26, Updated Jul 21, Updated Aug 29, Updated Jul 12, Updated Aug 30, Updated Mar 27, Greg DePersio and Brian Dolan.

Updated Oct 20, Updated Jul 27, Barclay Palmer. Updated Nov 23, Updated May 25, Updated Apr 18, Manish Sahajwani. Updated Jun 30, John Kicklighter. Updated Feb 09, These night traders should employ a strategy of trading specific currency pairs that are most active overnight. It is important to analyze the correlation between currencies when choosing a pair, as having time during the day to study the market and implement trades can lead to a successful strategy.

The main problem as a part-time trader is—you guessed it—time constraints. Here are some strategies for trading part-time when you have an inconsistent schedule. Assuming you work nine to five in the U. The best trading strategy in those time blocks is to pick the most active currency pairs those with the most price action.

Knowing what times the major currency markets are open will aid in choosing major pairs. The markets in Japan and Europe open a. are in full swing so part-time traders can choose major currency pairs. to midnight timeframe. While it is crucial to understand the best currency pairs that fit your schedule, before placing any bets the trader needs to conduct further analysis on these pairs and the fundamentals of each currency. The best strategy for part-time traders may be to let your computer be your "trading partner.

Another common strategy is to implement stop-loss orders , which means that if the market takes a sudden move against your position, your money is protected.

There is also a strategy for part-time traders who pop in and out of work 10 minutes at a time. These brief but frequent trading periods may lend themselves to implementing a price action trading strategy. Price action trading means analyzing the technicals or charts of the currency pair to inform trades.

Traders can analyze up bars a bar that has a higher high or higher low than the previous bar and look at down bars a bar with a lower high or lower low than the previous. Up bars signal an uptrend while down bars signal a downtrend, while other price action indicators may be inside or outside bars.

The key to success with this strategy is trading off of a chart timeframe that best meets your schedule.

These strategies may also serve you well as a part-time forex trader:. Being a regular retail forex trader is a difficult path to becoming rich. Currencies are impacted by many factors and so it can be difficult to predict the movement of a currency, particularly when surprise events occur. In addition, the forex market is not centralized and with that comes its own risks. A significant amount of information is needed to trade forex successfully and that type of information is not readily available to the average forex trader.

Now, if you are a large financial institution or investment fund, then the possibility of becoming rich through forex trading exists. Because the world is interconnected and commerce spans across all nations, foreign exchange is the most liquid and largest financial market in the world. FX refers to buying and selling currencies, which is done through currency pairs.

The amount that a foreign exchange trader makes will vary depending on how much trading the trader does, the institution that they work at, if they trade alone, and how successful they are. The forex market is desirable for part-time traders because it runs for 24 hours and is constantly in flux, providing ample opportunities to make profits at any point in the day.

However, the forex market is very volatile. Learn when to spot economic disruption in the market as it correlates with political, societal and natural disasters.

Price patterns fall into two categories. In this video, touch base on reversals and consolidations. Learn how both lead to the identification of particular patterns in forex trading. Display currency in:. Courses New Courses Trading Courses Investing Courses Financial Professional Courses Excel for Finance Courses Cryptocurrency Courses Personal Finance Courses All Courses About Us FAQs About Us About Our Experts Account Sign in to access courses. Section 1, Lesson 2.

Starting out in the forex market can often result in a life cycle that involves diving in head first, giving up or taking a step back to do more research and open a demo account to practice. From there, new traders might feel more confident to open another live account, experience more success, and break-even or turn a profit.

That is why it's important to build a framework for trading in the forex markets, which we outline below. Why are we focusing on medium-term forex trading rather than long- or short-term strategies?

To answer that question, let's take a look at the following comparison table:. Now, you will notice that both short-term and long-term traders require a large amount of capital — the first type needs it to generate enough leverage , and the other to cover volatility. Although these two types of traders exist in the marketplace, they are comprised of high-net-worth individuals, asset managers or larger institutional investors.

For these reasons, retail traders are most likely to succeed using a medium-term strategy. The framework covered in this article will focus on one central concept: trading with the odds. To do this, we will look at a variety of techniques in multiple timeframes to determine whether a given trade is worth taking. You may choose to act on signals you observe or dismiss them. The key is finding situations where all or most of the technical signals point in the same direction.

These high-probability trading situations will, in turn, generally be profitable. We will be using a free program called MetaTrader to illustrate this trading strategy ; however, many other similar programs can also be used that will yield the same results.

There are two basic trading program requirements:. Now we will look at how to set up this strategy in your chosen trading program. We will also define a collection of technical indicators with rules associated with them. These technical indicators are used as a filter for your trades.

If you choose to use more indicators than shown here, you will create a more reliable system that will generate fewer trading opportunities. Conversely, if you select fewer indicators than shown here, you will create a less-reliable system that will generate more trading opportunities. Here are the settings that we will use for this article:. Now you will want to incorporate the use of some of the more subjective criteria, such as the following:.

In the end, your screen should look something like this:. The key to finding entry points is to look for times all of the indicators points in the same direction. The signals of each timeframe should support the timing and direction of the trade. There are a few particular bullish and bearish entry points:. It is also a good idea to place exit points both stop losses and take profits before even placing the trade.

These points should be placed at key levels and modified only if there is a change in the premise for your trade oftentimes as a result of fundamentals coming into play.

You can place these exit points at key levels, including:. Let's take a look at a couple of examples of individual charts using a combination of indicators to locate specific entry and exit points. Again, make sure any trades that you intend to place are supported in all three timeframes. In Figure 2, above, we can see that a multitude of indicators are pointing in the same direction.

There is a bearish head-and-shoulders pattern, a MACD, Fibonacci resistance and bearish EMA crossover five- and day. We also see that Fibonacci support provides a nice exit point. This trade is good for 50 pips and takes place over less than two days. In Figure 3, above, we can see many indicators that point to a long position. We have a bullish engulfing, Fibonacci support and a day SMA support.

Again, we see a Fibonacci resistance level that provides an excellent exit point. This trade is good for almost pips in only a few weeks. Note that we could break this trade into smaller trades on the hourly chart. Money management is key to success in any marketplace, but particularly in the volatile forex market.

Many times fundamental factors can send currency rates swinging in one direction — only to have the rates whipsaw into another direction in mere minutes. So, it is important to limit your downside by always utilizing stop-loss points and trading only when your indicators point to good opportunities.

Here are a few specific ways in which you can limit risk:. Anyone can make money in the forex market, but it requires patience and following a well-defined strategy. Therefore, it's important to first approach forex trading through a careful, medium-term strategy so that you can avoid larger players and becoming a casualty of this market.

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Past performance is not indicative of future performance. Investing involves risk, including the possible loss of principal. Trading Skills. Company News Markets News Cryptocurrency News Personal Finance News Economic News Government News. Your Money. Personal Finance. Your Practice. Popular Courses. Table of Contents Expand. Table of Contents. Medium-Term Forex Trading. The Basic Trading Framework.

Forex Chart Creation and Markup. Finding Entry and Exit Points. Money Management and Risk. The Bottom Line. Key Takeaways New forex traders should often start by opening a demo account to get used to trading and using the tools involved in trading. Forex traders may be interested in short-, medium-, or long-term investing, depending on their interests, skills, time commitments, and risk tolerances.

When considering a forex trading plan, it is important to first master the platform from which you will execute your trades, setting the most useful indicators and other tools to your greatest advantage.

Even with a perfect forex trading strategy, no system is foolproof—expect that you will experience volatility in the market. Compare Accounts. Advertiser Disclosure ×. The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace. Related Articles. Trading Skills 10 Day Trading Tips for Beginners. Partner Links. Related Terms.

Forex Trading Strategy A forex trading strategy is a set of analyses that a forex day trader uses to determine whether to buy or sell a currency pair. Technical Analysis: What It Is and How to Use It in Investing Technical analysis is a trading discipline that seeks to identify trading opportunities by analyzing statistical data gathered from trading activity. Relative Strength Index RSI Indicator Explained With Formula The Relative Strength Index RSI is a momentum indicator that measures the magnitude of recent price changes to analyze overbought or oversold conditions.

Swing High Swing high is a technical analysis term that refers to price or indicator peak. Swing highs are analyzed to show trend direction and strength. Derivative Oscillator The derivative oscillator is similar to a MACD histogram, except the calculation is based on the difference between an SMA and a double-smoothed RSI. Facebook Instagram LinkedIn Newsletter Twitter. About Us Terms of Use Dictionary Editorial Policy Advertise News Privacy Policy Contact Us Careers California Privacy Notice.

Investopedia is part of the Dotdash Meredith publishing family. Dialog Heading. A trader who looks to open and close a trade within minutes, often taking advantage of small price movements with a large amount of leverage. A trader typically looking to hold positions for one or more days, often taking advantage of opportunistic technical situations.

Lowest capital requirements of the three because leverage is necessary only to boost profits. A trader looking to hold positions for months or years, often basing decisions on long-term fundamental factors. Large capital requirements to cover volatile movements against any open position.

Popular Courses. FX refers to buying and selling currencies, which is done through currency pairs. Forex Scalping Forex scalping is a method of trading where the trader typically makes multiple trades each day, trying to profit off small price movements. The offers that appear in this table are from partnerships from which Investopedia receives compensation. But it has become more retail-oriented in recent years, and traders and investors of many holding sizes have begun participating in it. Risk can be mitigated through stop-loss orders , which exit the position at a specific exchange rate. Because of the worldwide reach of trade, commerce, and finance, forex markets tend to be the largest and most liquid asset markets in the world.

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