There are many advanced forex trading strategies that are more complicated than everyday options like support/resistance trading. They are tailored to help forex traders like yourself navigate the complexities of the market, maximise profit, and mitigate risk. Consider making them part and parcel of your day-to-day trading activities.
Before we explore some of the best forex strategies, our primary goal at Invezty is to help you achieve maximum success. As such, we need to point something out. Advanced trading strategies are for seasoned traders with extensive experience. If you’re a newbie, you should go for simpler options that won’t overwhelm you and increase your risk exposure.
Key Principles for Advanced Forex Traders
Successful traders consistently apply and obey the most crucial principles. These are the guiding concepts and ideas that help them generate consistent returns and achieve long-term success. You should follow suit to maximise your profits and minimise losses. Here are a few key principles that will help you out:
Keep learning
The forex market keeps changing and evolving. The knowledge you acquire while starting won’t be enough. You should keep learning and reinventing. That will help you stay on par with the changes that take place in this sector, courtesy of technological advancements, economic developments, geopolitical shifts, etc. Read as many relevant books as you can and take specialised courses. Additionally, connect with and learn from other seasoned forex traders.
Use a refined strategy
An excellent strategy is the key to optimising risk-reward, avoiding impulsive decisions, and seamlessly adapting to ever-changing market conditions. If you don’t have a good strategy, develop one today, considering factors like your expertise, risk appetite, and schedule. Then, monitor your trading performance, identify weaknesses in your strategy, and adapt accordingly.
Remain disciplined
No successful undisciplined. The best know that discipline is a vital principle. Without it, issues like emotional or impulsive decisions will bring your downfall. The first to remaining disciplined is establishing and sticking to a routine. For instance, before each trading day, you can meditate, reflect, and review the previous day’s events. Also, avoid revenge trading and end each trading session when you reach your loss limit.
Use a solid risk management plan
You should have a good risk management plan, whether your capital is small or enormous. It will help you minimise losses and protect your capital. Your plan should encompass tools like stop-loss and take-profit orders. It should also feature a risk-reward ratio that’s at least 1:2, meaning each potential profit is 2X more than the risk. Not to forget, you should avoid over-leveraging since it will magnify potential losses and can wipe out your capital in extreme cases.
Leverage the best tools
As an advanced trader, you should have a list of robust tools that will help you succeed. Your list should include trading platforms like cTrader, charting tools like TradingView, and the best economic calendars. It should also feature unique solutions like automated trading software, news aggregators, and backtesting/simulation tools. For the best results, prioritise having quality tools over quantity.
Have clear goals
If you haven’t already, set well-defined trading goals. They will help you track your progress and stay motivated. While setting your goals, factor in the reason why you decided to become a forex trader. Additionally, use the SMART framework to set the best goals. To elaborate, ensure your goals are specific, measurable, achievable, relevant, and time-bound. Not to forget, you should have distinct short-term and long-term goals.
Advanced Forex Trading Strategies
The best strategies will help you capture market opportunities and maximise profitability. On the other hand, trading without suitable strategies is extremely risky and can lead to countless issues, from increased emotional trading to inconsistent performance. Here’s an overview of advanced strategies that can fuel your journey to success:
Carry trade
With carry trade, you borrow funds in a currency with lower interest rates, like JPY, and use it to invest in a high-interest-rate currency like AUD and other financial assets. Doing so allows you to earn the “carry”, which is the difference between the two currencies’ interest rates. This advanced strategy can help you earn a steady income and minimise risk exposure.
Hedging
Hedging is one of the best trading and risk management strategies for advanced traders. It requires you to offset losses that may arise from a specific position by taking an opposite position. For instance, if you expect the price of a specific asset to increase, you can put your money on it and then open another position that will allow you to profit and reduce your losses if the price dips.
Scalping
When scalping, you use small trades made over a few seconds/ minutes to capitalise on small price movements. The primary objective of a scalper is to make small profits from multiple trades, which ultimately accumulate into a juicy pot. To leverage scalping successfully, you must be a quick decision-maker and able to act with unerring precision.
News trading
With news trading, you use economic and financial news to make trading decisions. That includes news like central bank decisions, corporate news, and recent geopolitical events. But to be an excellent news trader, you must be adept at reacting promptly to news releases. You must also decide on the best way to, whether or not to copy the trends that often follow major news releases.
Technical Tools to Support Advanced Strategies
Advanced trading requires using the right technical tools. With them in your arsenal, identifying market trends, managing risk, and analysing price movements becomes easier. Here are several key technical tools you should consider using;
- Trend indicators: These tools help you identify the prevailing direction of the forex market, whether it’s neutral, bearish, or bullish, and make the right decisions. They also help you avoid the repercussions of relying on false signals. Remember, without correct trading signals, making profitable decisions can be challenging.
- Volatility indicators: These tools enable you to gauge and evaluate price fluctuations. With the best volatility indicators, you’ll always be in the best position to identify and capitalise on breakout opportunities.
- Momentum indicators: These tools enable you to measure the strength, speed, and sustainability of different price movements. They can also help you identify divergence, which happens when the price of assets doesn’t match the insights from technical indicators.
Conclusion
We’ve introduced you to numerous advanced trading strategies, key principles, and technical tools you can use to take things to the next level. Since you can’t use all of the recommended strategies, and your success hinges on using the right one, you should choose carefully. While doing so, consider important factors like your preferred trading style, prevailing market conditions, and risk tolerance. Additionally, research each strategy extensively before using it.
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