The hardest part of trading is opening a trade. Having a trading strategy saves the user from doubts and reflections on when to enter the market. They open a trade when they see certain favourable signals written in the strategy. A clear plan of action also allows you to get rid of unnecessary, chaotic actions and confidently close the deal.
There are different types of trading strategies. Their choice depends on the goals of traders, their experience and capabilities, including the time they are willing to devote to trading.
Before starting a detailed analysis of strategies to apply in 2022, remember the tips from professional traders:
- Choose simple and straightforward strategies;
- Inquire about the author of the strategy;
- Use no more than 4 indicators in one strategy at the same time;
- Test the strategy on a demo account and switch to a real one only with good results;
- Apply the 1-2-3 method: 1 currency pair — 2 timeframes — maximum 3 indicators. If after 100 trades you are profitable, the strategy is successful;
- Trade using stop-loss;
- Measure your earnings in points, not money.
- For a successful trade, the size of the potential profit must be at least twice the loss.
Best Trading Strategies for 2022
Now, let’s move from theory to practice:
Following the trend is considered one of the most correct and reliable ways to invest in securities in the medium and long term. Trend-based strategies use specific indicators to determine the start of a new trend.
But during periods of market instability, it is quite hard to track trends. The main enemy of a trending strategy is volatility: the stronger it is, the greater the drawdown on the account can be received by the trader. Therefore, some users are against the trend.
A trending strategy implies entering the market at the signal of a certain technical indicator (moving averages, overcoming the previous high/low, head and shoulders pattern, etc.) in the direction of the market movement. Simply put, the market rises — we buy, the market falls — we sell.
Trading on the news
Trading on the news involves opening deals in anticipation of the release of crucial economic statistics, which will lead to an increase or decrease in the value of an asset, and allows you to make money on growing market volatility and trend impulses.
The implementation of the strategy does not require special preliminary preparation, so both beginners and professional traders use it when Forex trading. In order not to miss an event that can have a significant impact on the state of affairs in the market, it is crucial always to have up-to-date economic and financial calendars at hand, read the Forextime blog, or find out useful information here. You also need to foresee the behaviour of investors when news is released and make decisions quickly.
Hedging is the most common news trading method. It is used before significant economic events. The bottom line: we open two opposite positions — sell and buy — before the news comes out. After the publication, the price of one position rises, and the resulting profit exceeds the losses from a losing position.
Fractals trading strategy
It offers mathematically accurate signals to enter and increase position. The method of exiting the market is sensitive to price dynamics and allows you to close the last phases of the trend, capturing at least 80% of the movement.
The basic tools of the technique are fractals — signals for the beginning of a price pyramid and entry ones. The direction and strength of the trend are shown by a combination of moving averages or the Alligator. With its help, a trader evaluates the significance of fractals and determines StopLoss levels. The three MA lines represent balance lines for a longer time frame.
The main thing is to master the classification of fractals and not violate the basic rules of the strategy in the process of trading. And since it was originally developed for the stock market with a specific structure, a certain demeanour of participants and driving factors, it is practically useless on its own. Forex fractals are recommended to be used only in conjunction with other technical tools.
If you are at the beginning of your trading career and want to reach certain heights already in 2022, then choose simple and understandable strategies designed for beginners. Carefully study the basic terms and concepts so that there is not a single question left before opening a real deal. Even the most profitable strategies can turn out to be unprofitable if not taken seriously. Start small and, as you gain experience, gradually move on to more complex strategies.
If you have been trading professionally in Nigeria for a long time, you can experiment: combine several strategies, use the most successful ones of other users and, based on them, create your own — the author’s version of a profitable trading strategy for 2022.