The main types of trading strategies. How to Apply Breakout Forex Trading Strategies Types of Forex Strategies
As a rule, "profitable" traders use several different types of trading systems at the same time to diversify risks and increase profits on trading in general. What are these types or classes of strategies, what are the features of each of them, and what are the distinguishing criteria for a particular strategy to belong to a certain type, we will talk about all of this below.
Any novice trader, in addition to the standard discipline, psychological stability and concentration, must first develop a systemic thinking, which is based on the trading system. For this, trading systems were created and later classified, which are designed to synthesize the preparatory work carried out in the form of: graphical, wave, candlestick and indicator analysis.
Consider 10 famous types of trading systems for trading on the Forex exchange.
# 1. Trending strategies
One of common, popular and most profitable types of trading systems in the Forex currency market is trending. It is built on assumptions about the trend of growth or decline, if it takes place, its stability and continuation can be traced. , from which the name of the system originates, is considered relative to a certain time period.
It should be distinguished that what is defined as a trend on a daily chart, in a monthly perspective, often turns out to be a market correction. The trend is based on indicators, but in most cases, the analysis of the data they provide shows strength at the end of the time period, or with a more sensitive setting can signal false entries... Therefore, when using a trend type of trading, it is worthwhile to approach such starting data with caution.
No. 2. Channel (flat) strategies
The second group of trading strategies based on the assumption that prices move within a corridor or channel, which is limited by resistance levels from above and support from below, is called flat or grid... The channel strategy, as it is called, organizes trades by buying near the support level and selling near the resistance level. In addition to determining the levels, which is not always possible to do for objective reasons, the strategy is sometimes built using oscillators. A combination of oscillators with support and resistance levels is possible.
No. 3. Counter-trend strategies
Another type of trading system that is already used by more advanced traders is a counter-trend system based on determining the trend reversal point... A correctly defined reversal moment allows you to get the maximum profit during the reverse movement, but the use of these strategies is associated with a large number of false entries and a very close stop loss level. The counter-trend type of trading includes strategies using the Alligator indicator and others.
No. 4. Systems on patterns
To complement trading strategies, or in some special cases, systems based on Forex patterns are used, which are characteristic combination of pricing model and its derivative over a period of time, which has a predictable continuation according to statistical data. The most famous patterns include such figures of technical analysis as "Adam and Eve", "two peaks", "folding rule" and others.
No. 5. Wave strategies
Some traders often use intuition and, according to these qualities, use a system based on wave analysis, based on and assuming that the behavior of the market depends on the psychology of the participants, expressed in impulsive behavior. The wave cycle, defined on the corresponding charts, is determined by the impulse of the trend in the forward direction and correction in the opposite direction, while the waves have a pattern and their own structure.
No. 6. Volatility breakout strategies
There are also types of trading strategies that suggest that an event after the price breaks out of an established range is significant, thereby having a chance for a trend to develop. Such trading systems are called based on volatility breakout... The boundaries are determined by the location at a small distance from the current prices, and the distance to them is determined by the current general market. The quality and number of trades, when using such a system, will be determined by the establishment of a breakout threshold, when placed close to current prices, it will result in a large number of false signals, and removal will lead to a decrease in the frequency of trades. Examples of this type are strategies based on the principle of the Keltner channel, Donchian channel, etc.
No. 7. Session trade
In addition to the systems described, there is also session trading. This type of trading system is characterized by the implementation of trading strictly during a specific trading session, this predetermines the use of certain currency pairs, which are most active during these sessions. An example of this type is the London Blast strategy.
# 8. Fibonacci Level Strategies
Another type of trading system is strategies that are based on trading with. This class combines the features of trend and pattern trading and also makes significant use of wave analysis. Principle - the price should create corrections from the trend, bouncing off special levels that are built on the basis of the Fibonacci number sequence.
No. 9. Strategies for pipsing and scalping
Pipsized trading strategies, aka scalping, based on intra-day trading and characterized by small take profit levels with relatively large stop loss orders.
No. 10. Universal strategies
Well, the last type of trading systems that we will consider is combined or, as they are also called, universal trading systems. This type of strategy is considered the most reliable, since its construction is based on a combination (mixing) of the various systems described above into one single system, after which a certain period of testing must be carried out and are used in trading.
Under Forex trading strategy understand the rigid set of trading rules used by a trader when carrying out transactions in the foreign exchange market. In other words, the concept of a strategy can be characterized as a trader's long-term view of the future of his work. Studying Forex strategies is necessary in order to understand the market and its movement, to be able to open deals in the right direction, depending on the prevailing market conditions.
All forex trading strategies are divided into several types, depending on the factor in question. According to the time factor, they are classified into:
- - long-term: trading on them lasts for several weeks and months;
- - medium-term: based on an open position from up to several weeks;
- - short-term: are used for trading with a period of several hours to several days;
- - scalping: are used for trading operations, the duration of which does not exceed 2 hours;
- - piping: are used for short-term (1-5 minutes) and frequent transactions.
Depending on the general principles of work, the following trading strategies are distinguished in the Forex currency market:
- - Simple: are based on simple rules for entering and exiting the market (a certain time, etc.).
- - Indicator: relatively clear and convenient strategies from the point of view of their construction and reading. Based on the interaction of several different indicators.
- - Non-indexable: the price serves as an indicator. They are based on trend lines, levels and, chart patterns, Andrews' Pitchfork and other chart elements. These are perhaps the most profitable Forex strategies that have proven themselves in the foreign exchange market. They allow you to predict the price movement with high accuracy, and, therefore, make a profit with minimal losses and risks.
- - Breakout: they incorporate the principle of breakdown of price highs and lows, price corridors, etc.
- - Martingale trading strategies: imply the conclusion of several transactions at once in different directions with a gradually increasing lot. The bottom line is that even with a number of unprofitable trades, a positive result will be achieved in the end due to a profitable trade with a large lot. Advantages - almost one hundred percent win-win, disadvantages include the need to monitor the size of the deposit so that it is sufficient to maintain open positions. It is worth mentioning that most of the Expert Advisors for automated Forex trading work on the Martingale principle.
For successful trading it is recommended to master at least 2 strategies. The fact is that even the best and most profitable Forex trading strategies do not give frequent signals to enter the market. What is the point of trading once a month? This way you can grow old before you have time to earn your first million! But if at the same time several proven and not contradicting each other according to the principles of trading strategies work simultaneously for one currency pair, then the number of open positions will grow, and accordingly, the profit (or loss, which is also possible) will grow.
Not all forex strategies are the same for different currency instruments. While the same rules and conditions of price movement apply on a chart with European currencies, a completely different trend can be observed on charts with Asian instruments under the same conditions. This means that even profitable Forex strategies can lead to losses if not used as intended. Before giving preference to one or another trading strategy for trading in Forex, you need to learn to understand it and work it out "on your fingers", for which there are demo accounts and cent accounts.
In modern trading in the foreign exchange market, traders use a variety of types of Forex strategies, which may differ in terms of trading time, used instruments, level of risk, as well as trend.
Each strategy has its own characteristics, is suitable for a certain style of trading, and assumes the need for certain trading conditions.
Speaking about the varieties of time strategies, there are such as:
- long-term,
- medium-term,
- intraday,
- short-term,
- ultra-short-term,
- scalping,
- piping.
Longer-term strategies are considered less profitable in percentage terms, but the risks are much lower, require less psychological stress, a higher ratio of Deposit and Margin.
Long-term strategies are called strategies when a trader holds a position open for a long time (from a couple of days to a month or more). These are the least risky systems that do not require making instant decisions, with a low psychological burden. But they require a large deposit, which will be at least 5-10 times higher than the Margin (the amount that is needed to open and maintain a position).
Indicator-free strategies- systems that do not use any standard indicators in the algorithm. As a rule, they are based on the use of the speed of reaction and the trader's feelings, on fundamental analysis, etc.
The classics of the genre are considered breakout strategies.
They work on the basis of signals received after the breakdown of the resistance or support line, the boundaries of the price channel, minimum or maximum, and are lagging. Such systems can be used to catch strong price movements that cover previous failed entries. Breakout strategies are systems in which a breakout of one or another important price level becomes a signal to trade.
Hedging strategies are based on risk insurance and are considered virtually risk-free. To conduct such a trade, a trader must have a deposit three times larger than the sum of one position. Most often, the time period is chosen M15 or higher, the currency pair can be any.
The types of strategies and the degree of risk differ
The system can be safe:
- with clear algorithms, minimum stop losses, large profits, if the percentage of profitability exceeds 50%.
- There are strategies with minimal risk - risks are in the region of 50% of profitable trades.
- Increased risks are when the probability of losing a deposit exceeds 50%.
- Strategies based on the Martingale principle are considered risky and violate all money management rules.
There are different types of strategies according to how they use the trend.
Trending strategies are based on trading with a trend that is considered a friend of the trader. You need to enter a trade at the inception of a trend, exit when it changes. Trend trading systems allow you to determine the inception of a trend, anticipate future changes, using the trend to make good profits.
Counter-trend strategies are based on the search for trend reversal moments. With the correct definition of this moment, the trader can take the maximum possible profit using the reverse movement. The key point in counter-trend trading is identifying the trend reversal point.
There are also strategies used for - in a state of uncertainty in the market, the absence of any trend movement. Prices move in a narrow range, almost horizontally. Trading in this case consists in opening pending orders below and above the price corridor in a flat.
Output:
For successful trading, it is advisable for a trader to study all types of Forex strategies, their advantages and disadvantages, features in order to use the selected systems as efficiently as possible in their work.
And already the number of strategies on this site will pleasantly surprise you, since there are already about 400 of them at the time of publication of this article. Therefore, choose and make a profit!
In the process of gaining experience, a trader will have to reconsider his attitude to the market more than once. He must personally test various types of trading systems and build on their basis his unique methodology. Let's try to help him with the choice and offer our own version of the classification of trading strategies.
Classification is usually carried out according to one of the basic characteristics, for example, indicator and non-indicator (), mono-currency and multicurrency ().
Here are the most popular types of trading systems, grouped according to the following criteria.
Systems based on fundamental analysis
Analysts' forecasts calculate price movements based on economic and political events, intra-market relations, official (and not only!) Statistics and many other factors, to understand which you will have to study at least the initial course of economics and finance. Today, it is the foundation that is the most powerful market driver. The most striking example of a fundamental trading strategy is arbitrage ()
Strategies are used only by large players who have the ability to open deals counting on structural changes in the economy, political events and other global factors. Medium-term positions with mandatory hedging by other assets (options, futures, assets). This also includes all types of trading systems that use cross-correlation.
Systems based on technical analysis
Fanatics of indicators, advisors and all kinds of mathematical dependencies make up about 80% of beginners and about 40% of professional market participants. Indicators of various types analyze the price history of an asset and determine key points, on the basis of which it makes a forecast of a future asset. The forecast is directly related to the accuracy of the indicator calculation.
Manual - all trading actions are performed manually. Recommended to everyone, without exception.
Semi-automatic- indicators and advisors analyze the situation, give out signals, but the decision is made by the trader. Reduces risk, but mistrust of the advisor leads to missing profitable entry points. Recommended for small but steady gains.
Automatic (mechanical, or trading robots) Is a software module in the language built into the terminal, which trades completely without human participation according to a certain algorithm. Recommended only with full confidence in the algorithm and control of the load on the deposit. ().
Long term- from a week to a year (or several). The least risk and psychological burden, no instant decisions are required. you need a large deposit, assets with predictable volatility and a clear fundamental background. Large investors, central banks, large hedge funds are working. The greatest efficiency is at the beginning of the trend, flat and rollbacks are insured with stops. Large players usually hedge the risks in the market for exchange-traded options for similar assets.
Medium-term- deals are held from 1 day to a week, optimal for novice traders who do not know how or do not want to wait. Practice shows that with a deposit / collateral balance of 5: 1 to 10: 1, it can be practically risk-free. The negative point is the indirect costs in the form of a swap. Such strategies are used by professional private speculators at the level of large banks and medium-sized investment funds.
Short term- from 1 hour to a day, a highly profitable (potentially!) strategy for fairly experienced traders who understand the market well. it is on such strategies that successful novice traders make their first serious deposit.
Ultra-short-term (or scalping)- the most attractive and dangerous for beginners. Trades from a minute to М15, profit 1-10 pips, huge spread costs. The probability of losses is very high, but there are many profitable techniques that, if used wisely, will help to swing the deposit.
Trend tracking- transactions according to the main trend. The most common and stable indicators are considered to calculate averages. Trend on periods above H1, that is, mainly medium and long-term strategies. Examples: moving averages, channel. The accuracy of trading is influenced by the correct choice of timeframe, control of fast price reversals and - lag (it is treated by using several indicators with different parameters). Medium risk
Counter-trend- an entry on a rollback from the main movement in the expectation of either a serious correction, or a change in the general trend. The main thing is to correctly determine the moment of entry, therefore oscillators in such a system are mandatory. It is used for the purpose of diversification when trading with the trend, which gives a decrease in risk and confident profitability, but control of the load on the deposit should be tight. Usually positions are held for no more than a day. Recommended for traders with good technical background
Pattern-based systems- development of graphic and candlestick patterns, which also include fractal structures and PriceAction models. The appearance of typical models gives a forecast for further movement. The more complex the model, the more reliable it is and the more time it takes to form it. It works best in the medium term and in the normal market, since the models are unstable in short periods and during speculation. Recommended for experienced traders. The risk is medium. ().
Wave Analysis Systems or the Elliott waves indicator and its modification of the Wolfe wave - these are types of trading systems that take into account the psychology of the crowd - the main driving factor in the market. (). The systems are medium-term, with an average level of risk, but suffer from some subjectivity (it is necessary to see “future” waves), therefore it is recommended to equip it with standard trend indicators. Does not work on highly volatile instruments. It is considered the choice of professionals and active analysts.
Volatility breakout- use of situations of breakdown of key levels (trend lines, channel boundaries, “round” price levels), confirmed by the accumulation of trading volume, most often after a period of flat. An option is trading on breakout / pullback from Pivot levels and trading on Fibonacci levels. The entry is made in the direction of the breakout or on a pullback from the level. Works great when changing sessions (opening-closing), fundamental events, as well as at the time of closing large options. It is used for periods above M5, the risk is standard, it is recommended to all fans of technical analysis. To confirm the "truth" of the breakdown, such systems are supplemented with oscillator-type indicators.
Session trading systems- trading at session boundaries using special indicators, you can read more here. Requires in-depth knowledge of asset specifics. Usually traded within the day. The deposit requirements are standard. Average risk, profitability too.
News- price jumps on news, speculative scalping option (). It is dangerous for newbies, but those who know how to work with trading volumes can earn decent money on this. Problems on the part of the broker (requotes, ban on entry, signal delay) are possible. Implemented in automatic trading projects (autoclick).
Hedging- types of trading systems to reduce losses from another position: opening multidirectional deals on one asset (locking) or on assets with a strong correlation (direct or reverse).
Arbitration (triple hedged, network). It is necessary to monitor the level of commissions (spread, swap) and the level of the deposit (moreover, if a hedging position is opened on another broker, pay particular attention to it).
Martingale- an increase in the trading lot in the event of a loss or a current unprofitable position. The club of fans of this tactic is constantly replenished with newcomers, but not for long, since the danger of a quick drain of the deposit with such trading has long been proven by millions of traders and poured money.
Anti-martingale- lots increase as you trade profitably (in a profitable direction). In this case, there is a dangerous load on the deposit, and with a sharp price reversal, a quick and poorly controlled loss is possible.
Choosing a strategy
The choice of types of trading systems comes down to the concepts of "simple-complex", "fast-slow" "speculate-trade". A conservative trader will immediately filter out all pipsing strategies, disrespectful fundamental analysis will not get involved with arbitrage and complex hedging, an aggressor will cling to scalping in any form, and systems based on wave analysis are unsuitable for automation. The size of the deposit fundamentally affects the choice of the strategy in terms of time - for long-term ones, a sufficiently large margin is needed.
Ultimately, trend systems confidently hold the lead in terms of profitability with a minimum deposit load. Aggressors successfully use counter-trend strategies, but their increased profitability is eaten away by high risk.
Remember: trading assets can change characteristics (correlation, volatility, peak periods) under the influence of fundamental factors and general market trends. Therefore, all types of trading systems should be able to fine-tune the parameters.
And as a conclusion ...
Almost all types of trading systems can be profitable. Each one needs its own market and trading conditions, but the main factor in any system is a person. This means that the system should be simple and understandable for you personally, adapted to the trading asset and your mode of operation. Moreover, between different types of trading systems are not clearly defined and mixed, universal strategies bring success. The ideal option would be to form a portfolio of several diverse trading systems in order to “catch” the maximum market movements and, as a result, to make money.
What are the most profitable forex strategies? Which Forex trading system should a beginner choose? What is the secret of successful Forex trading by professional traders?
Hello dear friends! Alexander Berezhnov with you.
This article is about Forex trading strategies. I myself have traded on FOREX for more than 3 years and in practice I was convinced how important it is to follow a well-defined strategy.
This article will help you understand the myriad of strategies that the Internet is replete with right now. I will describe the most popular of them and help you choose the best one, taking into account your individual psychotype of personality.
Are you ready for successful trading? Let's go then!
1. What are forex strategies and what are they for?
Imagine that you are entering a dark and unfamiliar room. Failure to turn on the light can lead to bumping, falling, bumping, or breaking anything. If you turn on the light, you can safely go around all the objects and get to the right place.
Forex strategy in this context is light. Applying it, we illuminate and "see" the market, predicting its movement.
Without a strategy, we are in complete darkness, make mistakes, lose money and see no further way. Now think about which is more profitable: stay in the dark or turn on the light? What is strategy?
Strategy is a developed system of rules that a trader must strictly follow when trying to increase his money in the foreign exchange market.
It allows you to confidently enter and exit the transaction, and not randomly open and close, ultimately losing all the capital on the deposit.
The strategy is like a traffic light: you always know that you open a trade on green, you expect a trade on yellow, and you are out of the market on red, without even considering entry options.
Believe me, having a decent real deposit, the most difficult thing is to open a deal. The strategy immediately saves you from these hard thoughts: you just enter the market when you see a certain situation (signals). But what are these rules to open?
The rules for opening deals can be as follows:
- intersection of indicators set on the chart;
- the achievement of certain levels by the price;
- candle shape or candlestick combination;
- formation of familiar patterns (figures) by the graph and much more.
You can follow someone else's Forex strategy, you can combine them with each other, you can develop your own, based on many others. The main thing is its presence.
Testing of a trading strategy in the foreign exchange market is carried out exclusively on a demo account. Testing period: at least six months.
If in six months the strategy shows results that are suitable for you, you can use it on a real account.
Now some thoughts. If you don't have a strategy, then the number of losing and winning trades should be equal, right? But in practice, it turns out that haphazard trading catastrophically quickly leads to the zeroing of the account.
Paradox
If you purposefully try to drain the deposit, then you will do little: it will decrease extremely slowly. But why is this happening?
The secret is simple: fixing small profits and large losses; buying where you need to sell and selling where you need to buy.
What is the conclusion? It should be as easy to trade profitably as it is to “drain” - you just have to follow the rules. If you are not yet experienced enough, then take your time. Before going directly to strategies, read the article.
It's easy to search for a market entry according to specific rules, but 90% of traders for some reason neglect to follow their strategy, leaving the market forever and losing the opportunity to be successful. I hope you want to enter the 10% of successful traders? - then let's go further.
2. What determines the choice of Forex strategy - 3 main criteria
So, you are aiming to apply a strategy. But there are a huge variety of even profitable Forex strategies. How to choose the right one for you?
Imagine you need to buy a TV. You know what it is and what you want. Where will you go to shop? That's right, to a store that sells consumer electronics.
But when you come to the store, you will find many models of TVs. Your task is to choose.
The TV you choose will be as good as any other model left in the store. It's just that it will be the TV with which you are most comfortable.
Do you think things are different in the Forex market? No, everything is exactly the same as in the example with the TV. We know that we need the most profitable Forex strategy, and now our task is to make a choice from the proposed options. And this choice will be no worse. It will simply be the strategy that interests you.
You just don't need to buy it - I have already prepared the most effective of them for you in this article.
There are only three criteria for selecting Forex strategies:
- Duration of holding open positions.
- Market analysis approach.
- Method for analyzing graphs.
Now more about each.
Criterion 1. Duration of holding open positions
Someone loves a marathon, and someone - a sprint. It's the same with strategies.
In accordance with this criterion, the following are distinguished:
- short-term;
- medium-term;
- long-term.
Below, I will tell you more about each type of strategy.:
- Short term. Suitable for experienced traders. Aggressive trading is assumed: about 100 trades can be opened per day. This also includes scalping and intraday.
- Scalping- suitable for traders with little capital. An open position can be held from 5 seconds to half an hour. Up to 200 trades can be opened per day. But more doesn't mean better. Scalping is considered one of the most difficult approaches to trading among traders. Scalping strategies in Forex are used regardless of the direction of the price (short or long).
- Intraday is intraday trading. The trade opens and closes during the day. Such strategies are simple, straightforward, suitable for all traders. Several trades can be opened per day for different currency pairs. Typically, this approach opens from 2 to 5 trades.
- Medium term. It will not do without knowledge of technical analysis. An open position can be held from 1 to 45 days.
- Long term. Such Forex strategies are suitable for both beginners and experienced traders. An open position is held for up to a couple of months, which allows you to monitor the market in a calm mode and not worry about the current state of an open deal. You don't need to sit at the monitor all the time, just open the chart once a day. If the forecast is correct, the profit is significant (up to several thousand points).
Criterion 2. Approach to market analysis (fundamental and technical)
To predict the direction of price with the greatest probability, you need to know about fundamental and technical analysis. Someone naively believes that only one type of analysis can be mastered. Unfortunately, the market does not tolerate amateurishness. Do you want profit? Comprehend everything.
Fundamental analysis Is a forecast of price behavior based on news and the general economic situation in the world.
Why analyze news? It is the release of some important news that can lead to a sharp change in trend and price reversal, which you may not be ready for.
By importance, news is divided into 3 types:
- insignificant;
- important;
- The most important.
The basic rule of experienced traders is not to trade when important news comes out! Why? Because your stop orders (stop loss and take profit) will be triggered with almost 100% probability. The best way out is to close the position before the news comes out.
Technical analysis Is an approach to market analysis using price chart analysis.
This forecast is based on past market movements. The indicators, the price chart itself and its elements: candlestick patterns (bars) act as analysis tools.
Technical analysis is well suited for short-term trading in a non-aggressive market.
Criterion 3. Method of analysis of charts (figured, indicator, candlestick)
Technical analysis comes down to three main methods of forecasting:
- By figures.
- By indicators.
- By the candles.
Figured Analysis assumes visual detection of a figure (pattern) on a price chart and a clear knowledge of where the price will go next. The direction of the price is determined by exact rules that the trader must know.
There are two groups of well-established chart patterns (patterns): price reversal patterns and continuation patterns of the current trend.
Reversal patterns include:
- triple base;
- double base;
- double top;
- double base;
- head and shoulders;
- inverted head and shoulders;
- diamond.
The trend continuation patterns include:
- rectangle;
- pennant;
- flag;
- wedge;
- triangle.
Example. You have spotted a double top on the chart. This means that the price tried to break through the level twice, but failed. You just have to look for an entry point to sell.
Indicator analysis involves the installation of various technical indicators on the chart, which will give signals to buy or sell. An abundance of indicators may not bring profit, so you need to choose several that are suitable and understandable for you.
Experienced traders usually use no more than 2-3 indicators at the same time.
In total, there are two groups of indicators:
- oscillators;
- trendy.
Oscillators usually indicate a possible trend reversal and work great in a flat *.
Flat(from the word "flat") - this is a situation in the market when the price is in the corridor and does not have a pronounced direction.
Trend indicators follow the trend and work great when it is in the market.
But even the most famous and accurate market indicators are not the golden grail.
Remember two important rules:
- You will get the maximum profit when several indicators give you the same signals.
- No technical indicator can take into account the behavior of the market when important news is released!
Example
The Stochastic Oscillator is in the oversold zone. This means that it is impossible to sell more, we are considering only the purchase option.
Candlestick analysis involves the study of all familiar Japanese candlestick combinations in order to determine a trend change or its continuation. Perhaps, candlestick analysis is the simplest and most straightforward.
Japanese candlesticks is a display of a chart in the form of rectangles, the body of which is painted in different colors depending on the type of candlestick. If the candlestick is dark, then the opening price is higher than the closing price. If the candlestick is not colored, then the opening price is lower than the closing price.
Using candlestick patterns, you can predict the continuation or reversal of the trend. See the picture below for an example.
There are bullish candles (their closing price is higher than the opening price) and bearish candles (the closing price is lower than the opening price).
Looking at the Japanese candlestick, one can immediately determine the market sentiment: in a given time frame (timeframe), buyers or sellers prevail.
Trading with Japanese candlesticks is convenient - you only need to find a familiar combination.
For example
We see a "Shooting Star" - a candle with a very small body, a long upper shadow and a small lower shadow. This candle immediately tells us what to sell.
Simple, isn't it?
3. How to choose the right strategy - 3 easy steps
I will say right away: the best Forex strategy is the one that is right for you.
I have been looking for my Forex strategy for about a year. At first, I practiced trading on simple and understandable strategies, gradually adding something of my own to them. This is how my strategy turned out.
Just pick and mix the ones that already work.
To choose your strategy, you will need:
- determine your psychological type;
- realistically assess your professional level;
- set how much time you will spend on trading.
Now about each item in more detail.
Step 1. Determine your psychotype (comparison table)
So let's find out who you are?
№ Psychotype Market behavior Optimal strategies 1 Sanguine He longs to earn money and puts all his strength into it. Consistent in trading, not upset about losses For a sanguine person, risk-reward-weighted strategies are suitable. 2 Choleric He wants to make money quickly, cannot open long-term positions, he is in a hurry. Can quickly drain the deposit due to its haste and carelessness Trading on short time frames is not recommended, it is better to choose for yourself medium-term intraday trading on H1-H4 intervals 3 Phlegmatic person The most successful in Forex. Knows how to wait, makes informed decisions, always calm Since a phlegmatic person treats trading with all responsibility, this psychotype has no limitations in choosing a suitable strategy 4 Melancholic Too inconsistent, overly careful, makes chaotic decisions Strategies with short stop losses and take profit are recommended Let's move on to the next step.
Step 2. Assess your professional level
It is clear that you cannot do without reading several books. Trading Forex without any knowledge is simply useless!
- Nassim Taleb - "Black Swan".
- Edwin Lefebvre - "Memoirs of a Stock Market Speculator".
- Eriy Nyman - Small Trader's Encyclopedia.
- Alexander Elder - "Trading with Dr. Elder".
These Forex books will help you understand the essence of the stock market game, risks and profitable strategies.
Step 3. Determine how much time you can devote to trading
Forex trading is available to everyone: from housewives to businessmen. It is possible to make money by devoting at least 1 minute a day, at least the whole day. There is no time limit.
For more productive and successful trading, arrange yourself a “no-trade day”. This means that on this day you don’t think about Forex at all, you don’t read thematic forums, books, you don’t talk about exchanges with your friends.
4. The best Forex strategies (FOREX) - an overview of the TOP 15 most profitable
So we got to the most long-awaited and "tasty" section. Here we will consider directly the strategies themselves with a detailed and understandable description of them.
Simple strategies for novice traders
These trading strategies are suitable for short-term and intraday trading.
Strategy 1. Moving averages
This Forex strategy is suitable for any currency pair. We will work on 2 timeframes:
- Weekly (W1).
- Four o'clock (H4).
The weekly chart is needed to determine the trend, and the four-hour chart is needed to open positions and find entry points.
On W1, set two moving averages: exponential (EMA) and simple (SMA). We take EMA with a period of 21, SMA with a period of 5. If the price chart is above two moving averages, then the trend is upward, and vice versa.
On H4, set two simple moving averages with a period of 55 and 7.
Rules. If we observe a downtrend on W1, then on H4 we consider only sales and ignore purchases.
There are two options for entering the market.:
- First option. When the lines cross from top to bottom, place a pending buy order exactly at the level of the moving average with a period of 55. If the level has moved, move the pending order as well. We are waiting for the price to open it. Stop losses are set at previous local extremes (minimums and maximums).
- Second option. We are waiting for the intersection of the averages from bottom to top, and the candlestick closes above this intersection point. Now we open a buy order at the market. Set the stop losses as in the previous version.
How to set take profit? Pull from the 55 Fibonacci retracement moving average. In the settings, set only the following levels: 144, 233, 377, -144, -233, -377.
If we see a buy signal, open three deals (all have the same lot). The profit will be located, respectively, on all these three Fibonacci lines. Do not forget to move the trade to breakeven (drag stop-loss).
Strategy 2. Three candles
This trading strategy is suitable for scalping. The trading timeframe is М1. Any currency pair will do.
Rules. We are waiting for the formation of two candles going in the same direction. Better that they were without long shadows. After the third appears, we open. We use the Stochastic Oscillator (Stochastic) as an additional signal to enter.
For example, if three candles are going up and the indicator is pointing to a downtrend, then the trade is not executed. The signal to buy will be when the Stochastic is in the oversold zone.
Strategy 3. London session
This is perhaps the simplest Forex strategy. The trading timeframe is M30. Trading time - London session, which starts at 10 am Moscow time. Best suited for a pair that has GBP. For example, for the popular currency pair GBP / CHF (British Pound / Swiss Franc).
Rules. Entry to the market is daily, but one-time. The closed first candle will be a signal to open in one direction or another. We place a pending buy order at its maximum, and a sell order at its minimum.
The stop loss is placed at the high or low of the same candlestick, depending on which order was opened: buy or sell. After the order is opened and the price passes 15 points, we set a breakeven.
We do not delete the second pending order. If the price reverses, you will still make money. In this strategy, you will either be in the black or go to zero. Thus, this Forex strategy is break even.
If important news comes out on this day, we do not trade!
Scalping strategies for short-term and intraday trading
Scalping offers large profits in a very short period of time. It is also associated with very high risks. If you are sure that you do not want to wait, but want to make money now, then this trading method is for you.
The technique is very simple and effective at the same time. Marat reviews the markets on a daily basis, which can be found on the broker's website in the "Training" section.
Strategy 4. Simple
Those who like to take risks will love the 1 minute scalping strategy. To work, we take the GBP / JPY pair and set the indicator on the price chart BollingerBands(Bollinger Bands) with parameters:
- period 50, Deviation 2 (red line).
- period 50, Deviation 3 (orange line).
- period 50, Deviation 4 (yellow line).
Rules. The optimal trading time is between the opening of the London session and the close of the Japanese session. Also, you cannot trade on the flat market during news releases.
Consider purchasing. We open when the price is between the orange and red lower lines. Stop loss is set depending on your personal percentage of losses in one trade. Usually this is no more than 3%.
The sale is carried out in the same way if a mirror situation is observed.
Strategy 5. Quick profits
"Quick Profit" allows you to use scalping in Forex effectively, while remaining a simple strategy. Suitable for any currency pair.
We will work on a 1-minute timeframe, setting exponential moving averages (EMA), Parabolic SAR and MACD for analysis. Take EMA with periods of 25, 50 and 100. Take the other two indicators with standard parameters.
Rules. The best time to collect profits is the opening of trades in London and New York. We open a buy or sell deal when the price crosses all EMAs. Parabolic SAR and MACD will serve as filters.
If the price is going to cross all the EMAs from the bottom up, the Parabolic SAR is below the price, and the MACD histogram is going up, then this is a sure sign of a buy.
Take profit is no more than 10 points, since the price can reverse in the opposite direction. As soon as the price moves away from the opened deal, transfer it to breakeven. Place your stop loss at previous local lows or highs.
Strategy 6. Outsiding
In order for the "Outsiding" trading strategy to work with a high probability of success, you must strictly follow all the points of the rules.
We work on М15 with the GBP / USD currency pair. You can try it on other instruments as well. Set the EMA with a period of 9 on the chart.
Rules. We consider only those candles that do not touch the moving average. An ideal candlestick is one whose minimum or maximum is located approximately 1 point from the indicator.
If we are considering buying, then the closing price of our signal candle should be higher than the previous high. Stop loss is placed below the minimum of the previous candlestick. We set the profit by the number of points of the previous candlestick. If the price has gone up sharply by 20 points, it is better to set a breakeven.
Trending strategies regardless of price direction
This group of strategies is aimed at detecting a trend and trading in its direction. They are not suitable for calm and lateral movement. But here it is possible to get a good profit.
Strategy 7. Juicer
This Forex strategy is suitable for the D1 interval. Currency pairs can be any.
Rules. Consider the conditions for opening a buy. We are looking for a combination of a candlestick with a black body (bearish candlestick) on the daily chart, followed by two white candles in a row.
Important!
The close of the second candle should be higher than the high of the previous white candle. If this condition is not met, wait for the next signal.
Place a pending buy order 5 points from the high of the second white candlestick. Stop loss is placed under the low of the same candlestick. It must be at least 45 points, but not more than 80 points. Take profit is set at 500 points.
If after 4 days the deal is in positive territory, set a breakeven. If the trade is in the red, close it at the market.
When you already have 200 pips of profit, place a trailing stop in 50 pips increments of 200 pips.
Strategy 8. Channels and envelopes
With this Forex trading strategy, we will work on H1 with the EUR / USD currency pair. You will need two indicators: Envelopes and BollingerBands.
Envelopes parameters: Period - 288; Shift - 1; MA - Exp method; Apply to - Close; Deviation - 0.15%.
BollingerBands parameters: Period - 24; Shift - 0; Deviations - 2; Apply to - Close.
Rules. Consider the conditions for opening a buy. We are waiting for the candlestick to cross the blue Envelopes line and close above it.
We open a buy position at the beginning of a new hour. Stop loss is placed on the lower red line. The size of the stop loss must not be more than 50 points!
When the price passes 40 points into the profit zone, we transfer the deal to breakeven. To get the maximum profit, pull up your breakeven along the lower BollingerBands line.
Strategy 9. Precise entry
This trading strategy is used by professional traders because it gives good signals and profits. Any currency pair for trading can be.
The search for signals will be performed on two timeframes: H1 and M15. Set PivotWeekly, ParabolicSAR on the chart (step - 0.02, maximum - 0.2) and three EMAs with periods of 7, 14, 21. Set the moving averages on M15 to find a more accurate entry.
Rules. Let's consider an example of a purchase. Open the hourly chart and look at the Pivot levels. We are waiting for the price to come to a certain level and bounce off it.
There should be no more than 1-2 candles! When a candlestick or two candles bounced and closed below the level, go to the M15 chart.
We are waiting for the fastest moving average with a period of 7 to cross the other two averages upwards. Now we enter the market.
We set the stop loss at the nearest minimum, but we will not set the take profit. It is better to close deals at the next pivot reversal level. When the price goes into profit, you can move the stop loss to breakeven, and then move it down every hour.
Breakout strategies without indicators
Forex non-indicator trading strategies are the easiest to understand and trade. They take into account important support and resistance levels that the price seeks and bounces off.
Strategy 10. Sniper
The Forex Sniper strategy is based on working with levels. The working timeframe is M5 or M15. Any currency pair can be traded.
Rules. An order is opened only upon a rebound or breakout of the level. New orders are not opened 20 minutes before the release of important news. You cannot gain more than 40 points in one day. If 40 points have already been accumulated, trading stops.
There are three options for entering:
- We open after a breakout, price fixing at an impulse level or a pullback.
- We open after a false breakout, when a rollback to an impulse level occurs.
- We open when the price exits the trading channel.
We enter with two orders of equal lots. The first order has a take profit of 15 points. For the second order, take profit is set at the nearest total impulse level. In simple terms, it is a support or resistance level.
When 15 points are taken, we close one order. You can set a breakeven on the second order.
Strategy 11. It couldn't be easier
This Forex trading strategy is for daily charts. Most suitable currency pairs: GBP / USD, USD / CHF, NZD / USD, AUD / USD, USD / JPY, EUR / USD, USD / CAD.
Rules. Consider a purchase example. We are looking for a specific candle on the daily chart: it should form a local maximum, have a long tail and a small body of any color on top.
We draw a horizontal line at the maximum of the candlestick. Next, we expect any subsequent candlestick to break this horizontal line by more than 10 points and close above our line. We place a pending order 5 points higher from the maximum of the formed candlestick that suits us.
Take profit is set at 100 points, and stop loss is set at 50.
If after the opening 3 days have passed, and the price has not reached the target, the transaction is transferred to breakeven.
When the movement is clearly lateral, you cannot look for entry points!
Strategy 12. Ingenious
Forex Strategy "Ingenious" works on GBP / USD.
Rules. Open the daily chart and look at the number of points that the price has passed. If it is 140 points in one direction, then this is already a signal to open a position soon. This unidirectional movement occurs about 7 times a month.
Stop loss is set at 60 points from the entry. Exit the market at 100 pips or at 11:30 (GMT) the next day. To be sure, set the minimum trailing stop at 50 pips.
Strategies based on patterns and candlestick analysis
Figures and candles are classics of Forex. They are easy to find on the chart and it is easy to determine in which direction the price will move. Having accurately identified the desired pattern, you are most likely to receive your profit.
Strategy 13. Pattern D
This Forex trading strategy is stable and classic, based on the "Double Top" and "Double Bottom" patterns. We work on the H4 timeframe with the EUR / USD currency pair. For help, we will use the SMA, EMA and MACD indicators.
- Parameters for MACD: LowEMA = 13, FastEMA = 5.
- Parameters for SMA: period 89.
- Parameters for EMA: 365, 21, 7.
Rules. Consider purchasing. To generate a signal, you need to find two minima. The second low should be slightly higher than the first. Both tops must be below the level - 0.0045 on the MACD-histogram. The stop loss is 10 pips below the second low.
We divide your usual lot that you trade into 3 transactions. For the first 30% of the position of the total lot, we fix the take profit above the line of the 21-period EMA.
For the second 50% of the position from the total lot, the take profit is located between the price reaching 89 and the 365-period EMA. The third 20% position of the total lot is closed when there is a strong resistance level nearby.
Strategy 14. Profitable Wedge
This intraday strategy is simple. It can be used on any timeframe and can be traded on any currency pair.
Rules. First, we build important support and resistance lines. Now you can search for the "Wedge" pattern on the chart. But this pattern can indicate both a continuation and a price reversal.
Consider a purchase example. After the Wedge is found, we place a stop loss 20 pips below the lowest side. Take profit is set equal to double the distance between the sides of the Wedge.
Exit the trade when reversal candlestick combinations appear, if the price has not reached the take profit.
Strategy 15. Key reversal
This is another Forex intraday trading strategy that shows amazing results in terms of profit. The work will be carried out on H4, and we take the GBP / USD currency pair. To filter false signals, we will additionally install the Stochastic indicator. The parameters are as follows: 14, 3, 3.
Rules. Rules for opening a buy deal. We are looking for a downtrend. We are interested in a candle that forms a local minimum and has a closing price higher than the closing price of the previous candle. We look at the Stochastic: it should be in the oversold zone, that is, below level 20. The indicator signal line is below the main line, or touches it (merges).
We open a buy at the next candle, and set the stop loss below the local minimum. The take profit is set twice as much as the stop loss. When the price has gone into profit at a distance equal to the stop loss, set a breakeven + 10 more points.
If a deal fluctuates around zero for three days or is at a loss, then it should be closed at the market.
5. What trading systems do successful traders use?
Now I would like to say about successful traders and their certain "trading secrets".
№ Trader Strategy 1 George Soros Getting inside information, speculative rumor, intuition. Likes to sell assets, because he definitely feels the beginning of the crisis 2 Ingeborga Mootz Works only with bank stocks. When making decisions, he relies on intuition. The basic rule is to hold shares for more than a year, but not more than two years 3 Richard Dennis Made a fortune in the market with only $ 400 trading futures. Claims that everyone can earn, since anyone can train 4 Larry Williams The king of futures. Made a fortune on the analysis of bars without indicators. Its main principle is to cut losses and the possibility of profit growth. 5 Warren Buffett Founder of the Forex trust management, since he was a long-term investor. The most successful deal that brought him billions was an investment in the insurance business. 6 Paul Tudor Jones He successfully uses pivot points in trading, and considers trading along the trend unprofitable. Surprisingly, his ratio of losing trades to winning trades is 75% versus 15%, which did not stop him from making billions. Believes that a trader's success depends on proper risk management 7 George Lane I traded using my created indicator - Stochastic. The most profitable signal throughout his 60 years of trading has been divergence around levels 20 and 80. 8 Stephen Cohen An adherent of short-term trading, who made up to 300 trades per day without reading any economic news at all 9 Ed Seykota Fully automated trading. In 15 years, he managed to turn $ 5,000 into 15 million in one account Also, the gurus of stock trading and investment (George Soros, Alexander Gerchik, Alexander Elder, Larry Williams) give beginners the following advice regarding the rules for making transactions and developing a Forex strategy.
Top tips from the pros:
- Any new Forex strategy doesn't have to be complicated. The simpler and clearer it is, the better.
- The abundance of indicators is not directly proportional to the profit. It is better to use no more than 2-3 indicators at the same time.
- A professional will never trade with the last money. He uses only those funds that he can afford to lose.
- Trading without a stop loss is a surefire way to reset your account to zero quickly.
- Apply the “1-2-3” method to your strategy: choose 1 currency pair and test it on 2 timeframes with a maximum of 3 indicators. If for 100 trades you are profitable, then the test is successful.
- Always measure your earnings in points, not money.
- Take a closer look at support and resistance levels. They can bring you very decent earnings.
- Professionals never triple their trading accounts in a month - this is mythical and unrealistic data. Their lossless Forex trading strategies are aimed at slow growth of the deposit, and not at insane unnecessary risks. The maximum that a successful trader expects in a month is 10% with the most risky strategy.
- If you are evaluating the possibility of entering the market for more than 3 seconds with scalping, you are missing out on profits. A lightning-fast assessment of the situation is a guarantee of profitable points on the account.
- If the size of the stop loss is less than or equal to the take profit, such deals cannot be entered into. The size of the potential profit must be at least twice the loss.
6. Real success stories of famous traders in the world
At its core, the Forex market is a ready-made business that is available to everyone absolutely free of charge. The only thing that needs to be invested in it is time.
Now I would like to briefly introduce you to the biographies of people who have earned millions of dollars on Forex and thanks to their persistence in studying the market. Their names are known all over the world, they have a lot of money on their accounts, and their strategies are simple and straightforward.
Some of them, thanks to the exchange game, gained fortunes in the billions of dollars and now, with their success, these speculators inspire thousands of traders around the world.
- Alexander Gerchik. Born in the USSR, graduated from the Food Industry Institute and immigrated to the United States. He worked as a taxi driver. The case brought him to a successful stock trader, whom Alexander Gerchik gave a lift to New York on Wall Street. This day changed his life. Gerchik became a successful trader and is now a managing partner of a large investment company, teaches exchange business to beginners.
- George Soros. Successful trader, investor, financier. Born into a middle-income family, after 1970 he was actively involved in stock trading and became famous for his phenomenal earnings on the British pound. In this deal, Soros earned a billion dollars in 1 day! Later, the financier released his famous book, which he knew "The Alchemy of Finance". There he described his own Forex strategy, which helped him become one of the richest people on the planet.
- Alexander Elder. He graduated from the Medical University and worked as a ship doctor. Then he became an editor in one of the journals on psychiatry. in the 1970s, Dr. Elder became acquainted with the opportunity to invest on the stock exchange and since then has turned his professional activity towards trading in the financial market. Now Alexander Elder is a world-famous expert in the field of exchange transactions. His book How to Play and Win on the Stock Exchange has become a worldwide bestseller and has been translated into 12 languages.
If you want to know more about Forex luminaries - watch online broadcasts and recordings of club days in. From my own experience, I was convinced that this is just a treasure house of the most valuable information.
7. Conclusion
Friends, I think after reading the article you are once again convinced that following a certain strategy in the Forex market is very important for profitable trading.
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