The traders in an interday trading refrain from buying and selling on the same day until unless they are making satisfactory profits. There are two main types of interday trading strategies:
- Swing Trading
- Positional Trading
As day trading involves holding the currency pair for a day – whether profit or loss – swing trading involves holding the pair for more than one day. Many traders sell the pair the very next day after booking the profit or loss, but many keep the position open for days with a high price target. Now, it depends if that target is achieved in one day or ten days.
There are three types of trading strategies involved in swing trading:
- Reversal Trading
- Retracement Trading
- Breakout Trading
Reversal trading comes into play when the market is toggling up and down within a particular range. Suppose, a currency pair is continuously making highs, and it is expected that now it will start making lows. So, the trader will short the position by placing a target buy point and stop loss point. In reversal trading, the target is mostly the top of the range.
Traders use a Fibonacci retracement tool to do retracement trading. This is a technical indicator that indicates the potential entry and exit points in the market by showing the support and resistance zones. Fibonacci ratio is calculated using a mathematical calculation and are shown in percentage as 0%, 23.6%, 38.2%, 50%, 61.8% and 100%.
Retracement trading is done by identifying the resistance and support levels keeping in mind that if the price has touched a particular high and starts to correct, there are high chances that the price will again touch that high.
Breakout trading is risky as the traders identify the charts to search for the support and resistance levels, but open a position when the market breaks that level and closes above or below the support and resistance. In breakout trading, the traders short the position when the price of the currency pair breaks the support level and longs it when the price breaks the resistance level.
Positional trading is done by investing in a currency pair as the investor, unlike day or swing trading, keeps the position open for weeks, months and even many years. The primary target of an investor, in this case, is a significant price movement and that is why he picks up the currency pairs that promise a big price change.
Positional traders do a thorough study of the currency pair which includes both fundamental and technical analysis. Once satisfied, they search for the entry and exit points and hold the position. However, this type of trading yields maximum profits, but there are some risks involved in long-term holding.
There is one more trading strategy that many forex traders are accepting these days to minimize the risk factor. The strategy is to trade using the binary options to do hedging in the forex market. This is very good for the beginners to minimize the loss potential and trade with minimum risk.
The binary option allows the traders to set up an expiry time of the trade. He can adjust the time from one second to weeks or even months.
While trading, you may come across ‘n’ number of trading strategies in the forex world, but the most common is the one listed in this article. The beginners should start their forex career from interday trading before wetting their hands in day trading.
Positional trading is altogether a different field as it involves an in-depth study of both fundamental and technical analysis. Also, it takes time to become perfect in positional trading, but if you do not have time to keep on checking the price again and again, then my advice is to go for positional trading.
Many forex brokers are offering the option of trading through binary options. It is an attractive alternative to regular forex trading. Well, whatever said and done, but it is always the best to embrace the latest.