Experience Trading
on the Go
on the Go
Reading time: 8 minutes
One of the benefits of trading in the foreign exchange market (Forex market) is flexibility. You do not have to trade during the usual 9-5; you can trade in the evening, in the morning, or even on your lunch break at work if you have the right trading strategy and access to a laptop or mobile app.
As a trader or investor, irrespective of whether you are a short- or long-term trader, it is important to understand the need for a solid trading plan.
A trading plan encompasses everything a trader requires to trade the Forex market. This includes trading strategies, risk management plans, money management tactics, preferred markets, the trading style adopted, trading goals and much more. Without a plan, trading successfully and achieving any type of longevity will be challenging.
Trading tends to be grouped into four categories: Scalping, Day Trading, Swing Trading and Position Trading.
Swing and Position trading are considered medium- to longer-term approaches, ideal for those with obligations elsewhere. Swing trading (target timeframes are 4h and daily charts) usually requires the trader to be at their desk at least once per day, typically for no longer than an hour in the morning or evening, as trades are often left open between a few days and up to a month in some cases. The demands of a Position trader (target timeframes are between the daily chart, the weekly chart and the monthly chart) can mean active involvement maybe once every couple of days or even less in some cases. Position trading resembles more of an investment approach, trades may remain open for months and sometimes years.
It is also important to understand that in determining a trading strategy’s edge – to ensure it has positive expectancy (how much, on average, the trading system can expect to generate for each dollar at risk) – a thorough back test would be in order, and perhaps a forward test on a demo trading account or a small live account to help include psychological elements. With no back-tested statistics to fall back on when you eventually trade larger account sizes, the emotional toll this can have on one’s psyche can be immense. For example, if you have had four consecutive losses in the back test, you know this is normal for the strategy and should not be a cause of concern during live trading. However, try remaining objective in a live trading scenario without those statistics after losing three consecutive trades; it is incredibly challenging.
Swing trading – one of the most popular trading styles used today – involves a combination of fundamental analysis (understanding the medium-term macroeconomic picture of the currencies you are trading) and technical analysis (the art of assessing future price action through the use of historical price and volume data). A Swing trading approach may involve holding a trade open for as little as a few days to more than a few weeks. Therefore, the issue of swap fees will need to be accounted for.
A popular Swing trading approach involves using Fibonacci retracement ratios and identifying trends through the 50- and 100-day simple moving averages (SMA). The idea behind the strategy is simple: the trader waits for the 50-day SMA to cross above or below the 100-day SMA to identify the trend direction and subsequently seeks retracements within that trend to either 38.2% or 61.8% Fibonacci retracement ratios. Some traders also opt to wait for additional confirmation at the Fibonacci retracement ratios in the form of Japanese candlestick patterns.
Below is the 4h timeframe of the USD/JPY. As you can see on 10 January 2024, the 50-day SMA crossed above the 100-day SMA: the trigger to identify an uptrend (a downtrend indication would mean the 50-day SMA crossing below the 100-day SMA). After this, price action reached a high of 146.41 and began retracing. This is the point at which you can look to plot the Fibonacci retracement tool (in this case, you would use the higher low from 143.42 and the high at 146.41) and look for bullish setups at either the 38.2% or 61.8% Fibonacci retracement ratios. The stop-loss orders for trades taken at the 38.2% retracement ratio are generally set under the 61.8% retracement ratio, though trades taken off the 61.8% retracement ratio are often set conservatively beneath the higher low (143.42).
In the example below, a 4h Japanese hammer candlestick formation emerged at the 61.8% retracement ratio on 13 January, causing the currency pair to rally and test the swing high (146.41), which is generally a take-profit objective for many swing traders who use this strategy. In this example, the trade was also bolstered by monetary policy divergence. At the time, the Bank of Japan was still in negative territory (it has since increased rates by 10 basis points), and the US Federal Reserve was (and still is as of this writing) holding rates at two-decade highs.
A news trading strategy requires a solid grasp of macroeconomics and often employs technical analysis to determine entry and exit points. The most significant benefit of this method is that you only need to be at the desk when scheduled news events are released.
Traders in this category seldom trade outside G10 currencies; most of their trades centre around major currency pairs such as EUR/USD, GBP/USD, etc. However, there will be times when trading in popular crosses becomes available, like EUR/GBP and GBP/JPY.
The idea is to follow central bank monetary policy and associated economic data and, from this, derive a bias for the currency. By way of an example, if the European Central Bank (ECB) is gearing up to cut rates soon while other developed economies are on hold (or increasing rates), then the euro (EUR) is open to possible shorting opportunities on any meaningful downside deviation in Europe’s data (the difference between forecasts and the actual release value), particularly for inflation (prices), growth (Gross Domestic Product) and employment.
For example, assuming a broad negative number for inflation comes out, this opens shorting opportunities in EUR currency pairs. Some traders will look to enter immediately; others will wait and see if a pullback unfolds and enter at resistance (the latter generally minimises slippage).
1. Is trading possible for busy professionals?
Yes. However, although you would effectively be trading part-time, a trading plan that addresses the need for back-tested trading strategies and risk management plans is required.
2. What is the best trading strategy for someone with limited time?
There is no ‘best’ strategy. What trading style one adopts and the trading strategies employed will be trader-dependent. If you only have an hour daily in the morning, then a Swing trading style could be something to explore. If you only want to check trades once or twice weekly, then Position trading could be an option.
3. Where can I learn more about trading strategies and trading styles?
You can visit the FP Markets Academy, a space designed for traders and investors to learn from industry experts. Here, you will find comprehensive articles and videos ranging from beginner to advanced.
Access 10,000+ financial instruments Auto open & close positions News & economic calendar Technical indicators & charts Many more tools included
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