Intraday Trading Strategies For Forex Traders

The foreign exchange (forex) market offers excellent opportunities to diversify your intraday trading portfolio. But it does have its challenges. You will need to carve out time to stay updated on technical aspects and news flows, as well as run your analyses. But this is a segment worth trading in as an intraday trader, for forex markets hold some of the most liquid assets.

Intraday trading strategies

Don’t enter the forex market unless you have a solid strategy—mistakes here can prove very costly. As you would in other forms of trading, focus on high-volatility currencies where prices move up and down sharply. The swings provide money-making opportunities. Also, look for currencies with greater liquidity, since you will need to square off your position by the closing hour. Once you have a currency wish-list in place, experiment with different intraday trading strategies.

Support and resistance

Let this be your jumping-off point if you are a beginner. Mark the support and resistance levels for each of your chosen currencies on daily charts. The support price is the point at which a declining stock price ceases to dip any further. The resistance is the price where a rising stock price hits its peak. If any currency prices appear to be testing these levels, a breakout may be likely and you could make your move.

Trend trading

Intraday traders often track trends in a stock for weeks or months. Say, you expect a rising price trend to start pulling back or a declining one to move higher. Use your data to try and predict when this movement might occur. Even sideways movements could present a trading opportunity. If you notice a box shape on the charts, a price breakout could be imminent. Once this happens, you could execute your order and move with the trend.

Price flip levels

At times, an old resistance level may become the new support level. Or, you may find that an earlier support level is now the resistance level. Using a pin bar chart, try to gauge if the price might cross this level or reverse course. You could even stick around to see if the price flips to the earlier support and resistance levels all over again.

Range trading

Sideways stocks could one day see the price breaking out of the range. Provided the stock has distinct high and low points within the range, you could go long using the range support or short based on the resistance. But avoid this if the range is too tight.

Breakout trading

This is a high-risk, high-reward approach for experienced day traders. Check if the support or resistance level of the currency has been tested at least a couple of times during the day. Then switch to a chart with a smaller timeframe (e.g. a four-hour or one-hour chart). See if the phenomenon occurs there as well. This will help you assess whether a breakout is likely.

Conclusion

Some of these forex trading strategies are more advanced than the others. So, rather than try to master them all at one go, try them out one at a time. See which techniques work best for you. If you need further support, open an account with a large broker like Kotak Securities that has its own research division and a wide range of trading tools to help you improve the way you trade.