ECN Trading Strategies

Forex traders may follow different trading styles or develop their own strategies to succeed in the Foreign Exchange market but their variety may arguably be streamlined to a few basic concepts that are most commonly used in ECN trading: scalping, hedging, news trading and some others. These tactics are not governed by any restrictions therefore making them very popular in the ECN environment. The only requirement is to tailor them to your needs.

Brief information on each of these trading methods is presented in this section.

Scalping. Traders may execute many trades per day by opening and immediately closing positions.  As soon as a minimum profit is made, a scalper exits the position. Hesitation may cause losses, so a scalper seeks to benefit from even a few pips as fast as possible. The choice of the currency pair depends on the trading pattern i.e., either more aggressive or more conservative and this strategy has proved to be popular with many Forex traders.

Hedging. Traders open the same positions but in opposite directions to ensure the execution of at least one of them with profit. Having potential to minimise losses, this strategy could be a good supplement to the trader’s risk and money management system.

News trading. Traders stay constantly tuned to the latest events in the geopolitical sphere and adjust their behaviour to the changes in the Forex market caused by such events. Economic news releases may provoke high market volatility potentially resulting in very large pip movements. Forex professionals often profit by correctly interpreting the trend, while generally, beginners attempt to avoid possible adverse effects associated with these volatile occurrences.    

Carry trade strategy. Traders buy (go long) a higher interest rate currency and sell (go short) a lower interest rate currency, to profit on the interest difference between the two currencies. This differential is paid by the broker each day the positions remain open. This method of investing is longer term and requires the careful consideration of a number of factors before being implemented.    

Triple SWAP strategy. Traders open positions on SWAP-positive currency pairs within a minute before the launch of the settlement procedure and liquidate it a few seconds after the SWAP is credited to their account. On a Wednesday night, when the Triple SWAP occurs, the profit has the potential to grow, which is viewed by some traders as an alternative source of income.

The above strategies are characterised by a strong theoretical base that requires thorough analysis and a clear understanding however, the application of these strategies may not necessarily help you succeed in Forex trading.