Scalping, Swing and Long-Term Trading Strategies: A Complete Guide

tradiThere are many different trading styles, and some of them will fit your trading personality. Each trading style, whether long-term or short-term, will allow you to generate gains if you combine it with a robust risk management strategy. Prior to developing a trading strategy, you should determine if you want to be very active or more passive. Are you comfortable holding positions overnight, or do you want to enter and exit during the course of a trading session? Would you prefer trading the popular currencies such as EUR/USD, GBP/USD or AUD/USD or perhaps the more exotic pairs, volatile and less liquid such as USD/TRY or USD/CNY? You should also ask yourself whether you are a value investor or like trading momentum. These questions will help guide you toward developing a trading strategy that matches your trading personality.

Your Trading Personality

Everyone has a trading personality. This is not solely determined by your willingness to accept the risk. Your trading personality stems from your desire to initiate risk and hold that risk. Some people need to be right at once, while others are content letting the markets take their natural path to their desired level.

Your trading personality also incorporates your ideas on investing. Are you the kind of person who is looking for value? Are you willing to catch the market and buy when others are selling or do you like the idea of jumping on a trend and getting off as soon as it accelerates? These concepts will help you determine if you are looking to trade a short-term or a long-term strategy. Remember, if you don’t have the time to watch the markets actively during the day, then a short-term strategy will likely be the wrong fit.

Types of Trading Strategies

There are several strategies that you can use based on your trading personality. If you like long-term trading strategies, you might consider the trend-following strategy. If you are more interested in short-term trading strategies, you can consider scalping or swing trading.

Long-Term Strategies

There are a couple of long-term trading strategies that are great for traders who are not looking for instant gratification. Two of the most popular are trend-following and contrarian trading strategies.

Trend Following

A trend-following strategy is one where you attempt to capture a trend where the exchange rate of a currency pair moves in the same direction for an extended period. One of the most efficient trading indicators that you can use to identify a trend is the Moving Average Crossover trading strategy. A moving average crossover uses two different moving averages to identify a change in the direction of a trend.

A moving average is used to smoothen the change in price action. A moving average is calculated by determining the average over a specific period. For example, the 20-day moving average is the average for the last 20-days. On day 21, the first exchange rate in the period is a drop, and a new average is calculated.

scalp

The moving average crossover strategy targets a time when a shorter-term moving average (such as the 20-day moving average) crosses above or below a longer-term moving average (such as the 50-day moving average). The red arrows on the USD/JPY chart shows crossover sell signals, while the green arrows show crossover buy signals. These crossovers represent periods in the middle of the trend. It is important to find a broker that provides low spreads with fast execution, such as Admiral Markets. There will be times when the market is in consolidation, meaning there is no visible trend, but you still receive a signal. The goal in trend following is to generate as much as you can knowing that markets only trend 30% of the time. Many traders use the opposite crossover to exit a position. For example, you enter a short position at the red arrow and stop and reverse at the green arrow. Alternatively, you can add a trailing stop or a specific risk vs. reward ratio to your risk management.

Swing Trading

The parabolic stop and reverse (SAR) is a swing trading system that is both time and price based and refers to a price-and-time-based trading system. The system was introduced by J. Wells Wilder. The parabolic SAR trails the price as the trend extends over time. This system always has you in a position that is reversed when you reach a signal. The indicator is below prices when they are rising and above prices when they are falling. The calculation of the parabolic SAR is based on the distribution of price and geared to catch a swing or trend in the market. You follow the trend until you receive the opposite signal. For example, you short the USD/JPY at the red arrows and reverse and buy at the green arrows.

long term

You can use the stop and reverse methodology for weekly data to make it longer-term, but most traders use daily or intra-day data, which means you have to watch the markets and be ready to stop and reverse.

If you are looking for a very short-term trading system, you might consider scalping the markets. This is a term that describes quick entries and exits with well-defined risk vs. reward parameters. You might consider using an indicator, such as the Fast Stochastic on intra-day data. This will provide you with short-term signals to scalp the market.

short term

The Fast Stochastic measures the rate accelerating in the exchange. When it moves too fast, the Fast Stochastic will rise above the 80-oversold trigger level. When the exchange rate declines too fast, the Fast Stochastic drops below 20. If you are able to place tight risk-reward parameters and buy when the Fast Stochastic drops below 20, you can also sell when the fast stochastic rises above 80. The Fast Stochastic also generates a crossover buy and sell signal. which can be added to your trading strategy to confirm your signal.

Summary

Whether you are trading a strategy that catches a trend or want to scalp the market for quick gains, you want to make sure that the strategy you chose matches your trading personality. Obviously, you must find a reliable broker to provide you with a good trading platform that allows you to operate a wide range of trading strategies. Admiral Markets is one of them. The company not only provides you with the cutting-edge trading platforms but also is a regulated broker that offers you a package of advanced Volatility Protection Settings and Risk Management. If you are trying to scalp the market, make sure you have time during the day to dedicate to your strategy. If you are more comfortable taking a long-term view, the trend-following strategy might be the best course of action.

This material is considered a marketing communication and does not contain, and should not be construed as containing, investment advice or an investment recommendation or, an offer of or solicitation for any transactions in financial instruments. The presented trading analyses refer to past performance which may change over time.

MT4 Web vs UTIP

As a Forex trader, you always need to have a clear overview of your positions, market moves, and macroeconomic data. While it is often possible to achieve this using your mobile device, it is still very challenging to modify the positions on your phone in accordance with the market developments. This is where web trading solutions come handy as such apps allow you not only to clearly see the chart but also to modify your positions based on the most recent information. As a client of a certain MetaTrader 4 broker, you have most probably struggled due to the lack of a proper web application.

Recently MetaQuotes, a company behind MT4, has released a web terminal for its flagship product. Yet not every broker has added its Web Trader from MetaQuotes to the armory of its platforms. The reason for this is rather simple, MT4 Web looks like quite an inferior platform compared not only to its Windows version but also to its rivals. Today we will compare MT4 Web version to one of its rivals, UTIP, a platform that a broker can launch either as a standalone solution or in conjunction with MT4.

MT4 Web Description

From the first look Web Trading solution from MetaQuotes seems rather neat and nice. It has nice a modern look & feel, unlike the desktop application. It has received a slightly improved design and color scheme, better-drawn icons, while everything else roughly stayed unchanged.

When looking at the advantages of MT4 Web, we can certainly highlight the provision of 1-Click-Trading terminal, presence of 3 types of charts and 9 time frames for detailed analysis.

It also comes with an integrated Fibonacci tool, graphical objects, and 5 indicators. This is rather a downgrade, as most of the MT4 traders have used to have 50+ indicators with an ability to apply their customly developed indicators and trading robots. In other words, MT4 Web can be used as a fallback trading platform, but it is certainly not capable of becoming the only platform a trader will ever use.

Another disadvantage of MT4 Web is the lack of customization. At the moment you are simply unable to customize any part of your trading platform. This is quite a big disadvantage, especially considering that most of the traders are actually using a dark interface of the platform.

UTIP Web Trader

This platform has been around for quite a few years and it has achieved quite some success with a vast pool of Russian brokers. Till today there are over 70 brokers that are offering trading via UTIP. Let’s take a look at this platform in a bit more detail.

Unlike MT4 Web, UTIP positions its toolbar on the right side of the platform, this makes it slightly more convenient to access quickly the tools you need.

When it comes to types of charts, UTIP demonstrates the same quantity and the same types of charts as MT4 Web. UTIP also supports multiple charts via tab interface, although tabs at UTIP are placed above the chart.

UTIP tries to simplify trading as it offers 5-time frames from 5 seconds to 1 day, which makes this platform a bit more convenient for intraday traders. Customization options are also a field where UTIP excels as you can easily customize any element of your platform using a color palette.

Also, with UTIP it is possible to use hotkeys for your trading, something that can be quite useful, especially for scalpers and something that is not currently available at MT4 Web.

Another advantage of this platform is that you can easily change the view options and monitor multiple charts within the same screen.

The verdict

Even though MT4 remains quite a popular platform, its Web Terminal needs quite a few additions to become at least anywhere close to such rivals as UTIP Web Terminal. As you can see, MT4 Web misses a few items, yet these missing features are often something that can set the trader apart from the profit.

This article is a guest post written by ForexBonusLab

Getting Comfortable – Something We All Must Do

One of the greatest tools that a trader has available to them is also the one they often ignore the most: Their own psychology. The Forex world has plenty of great books and articles about trading psychology, but many of them are broad-based, and often aren’t completely actionable after reading them. While it is fine to say certain things like “You should learn the behavior of a pair by studying it, and it will make you more comfortable in placing a trade”, the truth is that there are a lot of “clues” that your brain will give you if you are willing to listen.

One of the biggest issues that traders will have to come to terms with their trading careers is the idea of position size. While there are a lot of studies on the maximum benefit that a particular percentage risk that you take can greatly influence your profitability over time, they overlook a few important aspects of the psychology involved.

Many trading books will use a “2% rule” when it comes to position size. Basically, they go on about how only risking 2% of your account on any single trade will ensure that you don’t blow the account quickly if you have a few bad trades. The idea is that you have to be solvent in order to take advantage of potential opportunities in the markets. Certainly, this is something that I cannot argue with, and mathematically it does make complete sense. But it ignores the trader’s comfort, and that is absolutely vital.

I have friends w only risk 1% per trade. Why? Because they aren’t comfortable trading sizes larger than that. In fact, I even know people that only risk 1/2 % per trade as well. I know it sounds like it would be impossible to make money that way, it’s not. Compounding interest is magic, and even risking just 1% – you can clean up over time.

The point is that you have to be comfortable with your position size in order to benefit from it. You cannot trade effectively if you are far too nervous about the trades you are in. For example, if I were to risk 10% of my account, I know that for me it would be almost impossible to walk away from the computer and let the trade do its thing. I tend to take profits far quicker when I am risking more, and as a result: I leave money on the table. I also get nervous and cut out of trades when I am risking too much. I often will pay far too much attention to the P/L and not to the trade and market action itself. Remember, the market will do what it wants – and has no idea or care that you are risking 5%, 10%, or even 15% of your account. The variable is you, and how you react.

So how do you learn to deal with risk? It’s a simple process, really. I learned that if I couldn’t place a trade and walk away from the computer, it was a sign that I was trading in sizes that were too large for comfort. I went through a series of trades and found a percentage level that I was completely comfortable with, and found that the percentage amount allowed me to concentrate on the rest of the world, and not sit there glued to the monitor as the trade ebbed and flowed. Once I got this part down, I found that executing my trade plan was much simpler.

Once the execution of my trading plan was no longer hampered by fear and anxiety, I saw an immediate increase in my results. Once I knew my particular risk tolerance, the rest of trading is simply waiting for the appropriate signals and placing the trade. Do I still have losing trades? Of course. But what I don’t have is a lot of stress trading, and that in itself has made the entire experience much more enjoyable.