What Are The Different Ways To Trade Forex?

Forex trading can be a lucrative business if you know what you’re doing! Forex traders use various strategies to determine their entry and exit points when buying and selling currencies. The strategy you choose will depend on the kind of person you are, and it may take some trial and error to find what works best.

Every trader has different goals and resources, which affects their choice when choosing a strategy. Three main criteria to consider when picking a strategy would be the time you can put in, the number of trading opportunities you desire, and the kind of profits you want to make.

Forex strategies can be manual or automated. Manual systems will involve the trader to be sitting at the computer looking for and analyzing trading signals. Traders who use automated modes use an algorithm that looks for trading signals and conducts trades on its own. Automated systems may be beneficial if you do not want your emotions to get the best of you.

The following are some of the popular trading methods that you can look into if any strike your fancy. 


Trend Trading

Trend trading has to be one of the most commonly used and popular trading methods out there. It is when you identify an upward or downward trend in the market and base your entry and exit points on it. Your entry or exit will be dependent on the position of the currency’s price in the trend and the relative strength of the trend.  

This strategy is simple and great for traders with any level of experience. You have to trade according to the directional momentum of the market. Whenever you see a strong trend in the market, you trade in the direction of the trend. This type of trading has many trading opportunities and has a good risk to reward ratio.

Trend trading does involve a lot of tools and technical analysis skills. It is labor-intensive and will require time and effort put into it. If you can’t afford to put in the time, this strategy is not for you! Entry points are usually determined using oscillators like RCI (Relative Strength Index) and CCI (Commodity Channel Index). Exit points can be determined by calculating the best positive profit to risk ratio. 

Many technical analysis tools are used to evaluate trends like relative strength indicators, moving averages, directional indices, volume measurements, and stochastics.


Range Trading

It is best used in stable markets with less volatility and no surprise trends or events. 

Trading is done based on the concept that prices can remain steady and stay in a range for a particular period. It involves identifying points of resistance and support and then frequently selling at these predictable levels. Trading may take place repeatedly in one session.

Again, with this strategy, you will have to make use of technical analysis tools, many of them are the same as those used in trend trading. There is no set time for each trade as these range-bound strategies can work for any period. You just have to ensure that you are managing your risks as breakouts might occur, after which you would want to close any current range-bound positions.

Range trading can be very profitable with a good risk to reward ratio. You will have to spend a lot of time investing in each trade and be adept at technical analysis.


Swing Trading

This is usually a medium-term strategy that is speculative in nature. It can be used for a day to a week. Here, you will look at both range bound and trend markets and pick out “tops” and “bottoms” and enter long and short-term trades accordingly.

You will pick out “swings” based on the highs and lows over a period and set up your trades according to that. This is done to remove any erratic price changes that are seen in day-to-day trading and to avoid placing narrow stop losses.

Technical analysis tools like oscillators and indicators can show you the best entry and exit positions and times. 

This method has a lot of trading opportunities and a median risk to reward ratio. You will need to know technical analysis and be able to put in some amount of time.


Position Trading

Looking for a long-term strategy that may span over weeks, months, or years? Position trading might be for you. Position trading is based on profiting off of macroeconomic trends in the long-term of different economies. 

In this type of trading, small market fluctuations are not considered as it does not affect the bigger market picture.

You will want to use fundamental analysis with technical tools to act as indicators for entry and exit levels. You will need to develop an understanding of how economies will change and fluctuate over long periods. Time frame charts can be informational because of their comprehensive view of the market.

This type of trading may be long-term for profit, but the time you invest in doing it is relatively lesser than other methods. This will be a good fit for you if you have time to wait for profits and do not want to invest a lot of time doing the trading. Position trading also has a highly positive risk to reward ratio.

If you are looking for a quick cash grab, this strategy is not for you. Position traders require a lot of patience. There are lesser amounts of trading opportunities, and you will have to have a strong knowledge of fundamental and technical analysis.


Day Trading

Day trading is when you open and close trades in a single day. It is an intraday trading strategy that makes the use of small day-to-day market fluctuations. You can conduct a single trade or even multiple trades throughout the day. 

The trading time is extremely short and can be a matter of a few minutes or hours. You will typically open your trade during the day and will have to close your session at the end of the trading day. 

A day trader requires a strong foundation of technical and fundamental analysis. You should be able to use tools like moving averages to determine your entry and exit levels each day. Common techniques used in day trading are capitalizing on breakouts, trending, and range- bound currency pairs.

This method is low risk because the trades are only held for a very short time. Large scale market movements and shifts will not affect these trades. Although regular large sums of profit are not guaranteed, there is a daily cash flow for the trader. 

Day trading requires a lot of time and effort put into it and has only a median risk to reward ratio. There are, however, several trading opportunities available each day for you.

Compare the best online brokers for trading Forex


Scalping is another intraday strategy that has the shortest-term trades in the market. This trading system provides small profits from a large volume of frequent trades. As a scalper, you will be opening and closing many trades within one day.

Scalping can be done manually or by using algorithms that abide by preset guidelines as to when to enter and exit positions. You must be able to identify the trend or edge to make money scalping. This can be done in many ways, like using technical tools such as moving averages, oscillators, indicators, and fundamental analysis.

By levels identified using tools like moving average, you will be able to see the support and resistance bands. Scalping can be done within this band in a short time frame. Stops are placed a few pips away to prevent large market movements to affect the trade.

Scalping can take from anywhere around 1 minute to 30 minutes. You will have to be disciplined and efficient to trade a large volume of trades in such short amounts of time. The time investment and involvement are a must for this type of trading strategy unless you are making use of an algorithm. 

This type of trading has the highest number of opportunities from all forex strategies. It also, however, has the lowest risk to reward ratio. You will also have to have a strong appreciation for technical analysis.


Carry Trade

Carry trading involves borrowing one currency at a lower rate and investing in another currency that yields a higher rate. This type of trading is unique as you will try and take advantage of the interest rate differentials between the country currencies that are being traded.

Carry traders try and make profits by seeking out currency with a low-interest rate and then buying the currency of a country paying high-interest rates. The length of the trade depends on the fluctuations of interest rates and so can be either medium or long term.

Entry points are strong trending markets and should be confirmed before placing the trade. 

This is a good strategy for you if you do not want to invest a lot of time, but also profit off a median risk to reward ratio. You will have to have knowledge and appreciation for the forex market. This strategy has infrequent trading opportunities and will not be suitable for you if you want constant trades.



There are many strategies one can go for while forex trading; make sure the strategy you go choose is well researched and suits your needs! If your current strategy is not working out for you, maybe the ones discussed above will be an attractive option to switch over to. 

As long as you take caution and make sure your knowledge and foundations are firm, you can turn forex trading into consistent profits!