The normal forms of foreign exchange trade are long trade and short trade. In long trade, the trader is betting that the price will increase in the future and they can profit from it. In short, the currency price will decrease in the future. Traders also use a strategy based on technical analysis like breakout or moving day averages in forex trading.

Based on duration and number of trading strategies can be categorized into four types:

• Scalp trade: The trade consists of the position held in seconds or minutes. The profit amount is restricted to the number of pips. These trades are cumulative. That means small profits are made, with each trade adding up to a tidy amount at the end of the day. It relies on the predictability of price swings and does not handle volatility. Traders tend to restrict trades of most liquid parts at the busiest time of day.
• Day trade: These are short-term trades in which positions are held and liquidated on the same day. The trade duration can be hours or minutes. Traders need analytical skills and knowledge of important indicators to maximize profit gains. Like scalp trade, it relies on incremental gains.
• Swing trade: The trader holds the position for a longer period of the day. They can hold the position for a day or weeks. These Forex trades are useful where there is a major announcement from the government or in the situation of economic stimulus. They have a longer timeline and do not need constant monitoring throughout the day. In technical analysis, swing trades can be able to gauge economic and political developments and their impact on the currency movement.
• Position trade: The trader holds currencies for a long period, lasting as long as months and years. This type of trade needs fundamental skills as it provides a reasoned basis for trade.

Charts are used for forex trading

• Line chart: It is used to identify big picture trends of the currency. It is the most basic and common chart used by chart traders. The closing trading prices for periods are displayed. It is used to devise strategies. You can get the information contained in a trend line to identify the breakout or change in the trend of rising and decline in prices.
• Bar charts: They are used to represent specific periods for trading. It provides more information than line charts. Each bar chart has one day of the opening price, high price, low price, and the closing price of a trade. Different colors are used to indicate the price movement. Green is used for the rise in prices and red is used for the fall in prices. The bar chart helps to identify whether it is a buyer market or a seller market.
• Candlestick charts: These charts are visually appealing and easier to read. The upper portion of the candle is used for the opening price and the highest price for the currency and the lowest point is the low price or closing price. A candle represents declining prices and is shaded in red, an increasing candle is green and suggests growth.