Any trading strategy is based on entry and exit levels. Some traders prefer to enter at market – that is, to buy or sell a currency pair at the current market levels.
Some other traders like to wait for the market to move first and to act second. These traders typically use pending orders to buy or sell at higher or lower market levels.
These traders use technical analysis.
But there are also traders who use fundamental analysis. That is, on a US dollar positive news, they buy on retracements typically for scalping (i.e., short-term profits).
So when one talks about trading strategies, they are likely technical ones. Therefore, if you want to discover insightful forex trading strategies you can utilize with any South African broker, look no further than these technical ones.
Golden and Death Crosses
This is a trading strategy based on moving averages. It uses a long-term moving average (i.e., MA-200) and a medium-term one (i.e., MA-50).
When the fastest moving average crosses above the slowest one, it is said that the market made a golden cross – a bullish signal. It implies further strength.
Conversely, the market forms a death cross when the fastest moving average crosses below the slowest one. This is a bearish signal and traders use it to sell short a currency pair.
Divergences with an Oscillator
Oscillators are momentum indicators. They travel between certain levels, and traders interpret them as offering clues regarding an overbought or oversold market.
Take the Relative Strength Index (RSI), for example. It travels between 30 and 70; whenever it moves below 30, the market is oversold. Or, when it moves above 70, the market is overbought.
But comparing the oscillators’ levels with the actual price action is even more interesting. Because an oscillator considers more periods before plotting a level, it is more “trustworthy” than the actual price action.
Therefore, it may be that the market makes two lower lows or two higher highs, but the oscillator diverges. That is – to not confirm the most recent market move.
Whenever that happens, the trader should stay with the oscillator.
Head and Shoulders
The head and shoulders is a reversal pattern. As such, it occurs at the end of bullish trends.
Trading it requires a strategy for interpreting the pattern’s elements. Like the name suggests, this pattern resembles the human body – a head and two shoulders.
Naturally, there is a neckline below the shoulders – this is the level to short the market and target a distance similar to the one from the top of the head to the neckline, projected from the neckline.
Trend Trading
It is said that the trend is your friend. Therefore, one should not try to trade against trending market conditions.
A trend is either bullish or bearish, and the best way to trade it is to stick with the series of highs and lows it makes.
Namely, a bullish trend is made up of a series of higher highs and higher lows. Conversely, a bearish trend is made up of a series of lower lows and lower highs.
Until these series hold, one is better off trading with the trend than against it.
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