Day trading is a strategy designed to trade financial instruments within the same trading day. That is, all positions are closed before market close. This can be a single trade or multiple trades throughout the day. Trade times range from very short-term matter of minutes or short-term hours , as long as the trade is opened and closed within the trading day. Traders in the example below will look to enter positions at the when the price breaks through the 8 period EMA in the direction of the trend blue circle and exit using a risk-reward ratio.
The chart above shows a representative day trading setup using moving averages to identify the trend which is long in this case as the price is above the MA lines red and black. Entry positions are highlighted in blue with stop levels placed at the previous price break. Take profit levels will equate to the stop distance in the direction of the trend. The pros and cons listed below should be considered before pursuing this strategy. Scalping in forex is a common term used to describe the process of taking small profits on a frequent basis.
This is achieved by opening and closing multiple positions throughout the day. The most liquid forex pairs are preferred as spreads are generally tighter, making the short-term nature of the strategy fitting. Scalping entails short-term trades with minimal return, usually operating on smaller time frame charts 30 min — 1min. Like most technical strategies, identifying the trend is step 1. Many scalpers use indicators such as the moving average to verify the trend.
Using these key levels of the trend on longer time frames allows the trader to see the bigger picture. These levels will create support and resistance bands. Scalping within this band can then be attempted on smaller time frames using oscillators such as the RSI. Stops are placed a few pips away to avoid large movements against the trade. The long-term trend is confirmed by the moving average price above MA. Timing of entry points are featured by the red rectangle in the bias of the trader long.
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Traders use the same theory to set up their algorithms however, without the manual execution of the trader. With this practical scalp trading example above, use the list of pros and cons below to select an appropriate trading strategy that best suits you. Swing trading is a speculative strategy whereby traders look to take advantage of rang bound as well as trending markets. Swing trades are considered medium-term as positions are generally held anywhere between a few hours to a few days. Longer-term trends are favoured as traders can capitalise on the trend at multiple points along the trend.
The only difference being that swing trading applies to both trending and range bound markets. A combination of the stochastic oscillator, ATR indicator and the moving average was used in the example above to illustrate a typical swing trading strategy. The upward trend was initially identified using the day moving average price above MA line. Stochastics are then used to identify entry points by looking for oversold signals highlighted by the blue rectangles on the stochastic and chart. Risk management is the final step whereby the ATR gives an indication of stop levels.
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The ATR figure is highlighted by the red circles. This figure represents the approximate number of pips away the stop level should be set. For example, if the ATR reads At DailyFX, we recommend trading with a positive risk-reward ratio at a minimum of This would mean setting a take profit level limit at least After seeing an example of swing trading in action, consider the following list of pros and cons to determine if this strategy would suit your trading style.
Carry trades include borrowing one currency at lower rate, followed by investing in another currency at a higher yielding rate. This will ultimately result in a positive carry of the trade. This strategy is primarily used in the forex market. Carry trades are dependent on interest rate fluctuations between the associated currencies therefore, length of trade supports the medium to long-term weeks, months and possibly years. Strong trending markets work best for carry trades as the strategy involves a lengthier time horizon.
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Confirmation of the trend should be the first step prior to placing the trade higher highs and higher lows and vice versa — refer to Example 1 above. There are two aspects to a carry trade namely, exchange rate risk and interest rate risk. Accordingly, the best time to open the positions is at the start of a trend to capitalise fully on the exchange rate fluctuation. Regarding the interest rate component, this will remain the same regardless of the trend as the trader will still receive the interest rate differential if the first named currency has a higher interest rate against the second named currency e.
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Could carry trading work for you? Consider the following pros and cons and see if it is a forex strategy that suits your trading style. This article outlines 8 types of forex strategies with practical trading examples.
When considering a trading strategy to pursue, it can be useful to compare how much time investment is required behind the monitor, the risk-reward ratio and regularity of total trading opportunities. Each trading strategy will appeal to different traders depending on personal attributes.
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Matching trading personality with the appropriate strategy will ultimately allow traders to take the first step in the right direction. DailyFX provides forex news and technical analysis on the trends that influence the global currency markets. Leveraged trading in foreign currency or off-exchange products on margin carries significant risk and may not be suitable for all investors.
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We advise you to carefully consider whether trading is appropriate for you based on your personal circumstances. Forex trading involves risk. Losses can exceed deposits. We recommend that you seek independent advice and ensure you fully understand the risks involved before trading. Paul Tudor Jones is considered as one of the wealthiest day traders alive to this day, with a net worth at 4. Ref Wayne is the best and most successful Forex trader in South Africa to date. Ref Wayne has developed excellent trading skills which he has transferred into business after he was suffering from a lack of career development opportunities growing up.
This became his main driving force to put a lot of effort into trading and he became a multimillionaire, joining the ranks of top 10 forex traders in South Africa, when he was only 22 years old. Ref Wayne has created the first South African cryptocurrency named Pip Coin and is an entrepreneur which puts a lot into providing proper financial education to the South African population.
Ref Wayne has created the African Forex Institute and released some free Forex lessons for the community. His net worth is 4. Alexander Elder trading approach focuses more on money management rather than technical aspects, employing his three Ms: mind, method, and management in his literature. Jabulani Ngcobo was born in is currently one of the richest Forex traders in South Africa to date. Jabulani Ngcobo is a self-made millionaire and the author of Cashflow Naked , a biography and a lesson of financial education.
Lawrence Hite is a hedge fund manager who focuses mostly on systems trading and he also become the principal investor and chairman of Metropolitan Venture Partners. Abigail Johnson , the daughter of Edward C. Shaun Benjamin earned his first million Rand at 21 years of age and studied engineering after graduating Newcastle High School back in Due to circumstances he was led to start trading FOREX, and he ended up quitting his job after raising enough funds to found the Benjamin Forex Academy.
He matriculated from Newcastle High School in and was accepted to study engineering, but had to abandon his studies because of a lack of finances. Shaun Benjamin secured a learnership through Khethekile Mining in Newcastle, and obtained a National Certificate in underground coal blasting operations. He started trading Forex. Shaun Benjamin eventually quit his job when he had saved enough money, and founded Benjamin Forex Academy to teach others the skills he had acquired. Benjamin Forex Academy is the only non-profit training centre in South Africa , aiming to help others attain financial freedom and to curb unemployment.
He advises youngsters to remain positive and to think out the box.
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Nelisiwe Masango is the director of the Forex trading company Bear Run Investments and has spearheaded three successful businesses in total. As a schoolgirl Nelisiwe wanted to become a neurosurgeon, but developed a love for finances and investments. Nelisiwe Masango started learning entrepreneurial management, but soon started learning how to trade, and became very successful at it, becoming one of the top forex traders in South Africa.
Paballo Nkwe and Danielle Lester mentor individuals, start-ups, South Africa forex traders and companies and have created models and platforms by using technologies and financial intelligence, and these platforms and models can be used by anyone.
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Paballo Nkwe and Danielle Lester have an incubation program, where they visit women in South African Universities to teach them about the finances and help them develop financial intelligence and teach Forex trading and ways to make future investments. Additionally, WIF also has subsidiaries that provide signal subscription for those who are already trading but not profitably.
Reabetswe leads and represent W. E division as a living testimony, a born leader, a woman of power and a royal Queen as witnessed through her hard work. Jennifer graduated from business school with degrees in finance, statistics, and operation research and was first employed at Morgan Stanley , and later became a partner and portfolio manager at Arrowhawk Capital Management. Linda Raschke began trading professionally from the early s, and she worked at the Pacific Coast Stock Exchange and then the Philadelphia Stock Exchange for a total of 6 years before working for herself as a day trader.