The need to have your own trading strategy is written in almost every trading manual. Firstly, the process of creating your trading scheme allows you to bring the understanding of trading to perfection. Secondly, it allows to exclude from it any accident that hides additional risk. The first trading strategies were developed in the 80s of the last century, and for that time they were advanced instruments for trading in the forex market. But since then, the pricing principle of financial instruments has undergone noticeable changes. This was mainly influenced by a significant increase in the volatility of liquid assets. Therefore, their relevance over time was diminished and now new tools are needed.
A profitable Forex strategy is a kind of instruction for a trader, helping to follow a well-defined algorithm and protect his deposit from the emotional mistakes and consequences of the unpredictability of the Forex market.
If you adhere to your forex trading strategy, you always know the answer to the question – what to do in certain circumstances of the market. You have the terms of opening of the transaction, the terms of its closure, you do not guess if the time is right or not. You do as your trading strategy tells you. This does not mean that it can not be changed. A “healthy” scheme of trading in the currency market must be constantly adjusted, it must meet the realities of the current market trends, but there should be no unreasonable arguments in it.
Online you can find descriptions of various strategies, the use of which allegedly guarantees a monthly doubling of capital. “Break-even” strategies based on dubious trading tactics are also there in abundance. The most popular of them are the Martingale and averaging methods. The forms that a trading strategy can take can combine a variety of methods. However, there are a number of the most used options:
- Trading strategy based on several complementary technical indicators
- Bollinger Bands Trading Scheme
- Strategy on moving averages
- Technical shapes and patterns
- Fibonacci trading
- Candle trading strategy
- Trend Trading Strategy
- Flat trading strategy
- Fundamental analysis as the basis of the strategy
TOP 3 most profitable forex strategies
Scalping strategy "Bali"
This trading strategy allows trading on the H1 timeframe with a EUR / USD currency pair.
As assistants, you will need the Linear Weighted Moving Average (period - 48), Trend Envelopes_v2 (period - 2) and DSS of momentum (parameters: 18.16, 3, 8) indicators.
The yellow line on the price chart will indicate the Trend Envelopes indicator. Determine the time when the next candle closes above this line - the indicator will then be under the price of the instrument. At the same candle, the price will be at the closing of the hour above the Linear Weighted Moving Average line. The main line of the DSS of momentum indicator will be green on the chart, it should be located above the signal line. A buy order is opened when all these conditions are combined. Then you set a stop loss at 25 points, and take profit - at 50 points. For sales transactions, the same conditions are “turned over”.
Candlestick strategy “All-bank”
This profitable Forex strategy is weekly and can be used on different currency pairs. It is based on the spring principle of price movement. For trading, you only need a chart in any terminal and a W1 timeframe.
You must estimate the size of the candle bodies of different currency pairs (AUDCAD, AUDJPY, AUDUSD, EURGBP, EURJPY, GBPUSD, CHFJPY, NZDCHF, EURAUD, AUDCHF, CADCHF, EURUSD, EURCAD, GBPCHF) and choose the longest distance from the opening to the close of the candle within of the week. This pair will open a deal at the beginning of the next week.
If the candle was bearish, then the position will be long, if bull - short. Be sure to set a stop loss of 100-140 points and a take profit of 50-70 points. When the middle of the week comes, we close the order if it has not yet closed by profit or stop. After that, wait for the beginning of the week again and repeat the procedure, in no case opening the transaction at the end of the current week.
“Parabolic profit” based on the moving average
As you may have guessed, you need to set three moving averages on the chart (10, 25 and 50), as well as the Parabolic indicator. For the convenience of further actions on the analysis of the schedule, you can highlight the lines of the slide in different colors. You will need Parabolic as a moving average signal filter. If you intend to open a buy deal, first make sure that the Parabolic is at the bottom, if the position is short - the Parabolic should be at the top. So, we define the entry point by the behavior of the sliding with the parameter 10. It must cross the other two sliding - 25 and 50. If it does it from the bottom up, then it's time to open a long position (to buy). If on the contrary - sell. For a stop loss, it is better to use a trailing stop.
Characteristics of an effective Forex strategy
And finally, let's see, what makes a profitable Forex strategy different? What are its integral and mandatory characteristics? In my opinion the three most important features can be defined.
- The minimum number of lagging indicators. The fewer they are, the higher the accuracy of the forecast.
- Simplicity. The fact that you understand your strategy is more important than its saturation with complex elements, formulas, schemes.
- Uniqueness. Any trading strategy should be tailored to your trading style, your character, your circumstances and so on.
The problem is that for most traders, fundamental analytics is limited to working with the economic calendar. Of course, some events have a short-term impact on the value of the asset, but to predict the direction of the price impulse in this case is almost impossible. To successfully trade in the Forex market, create your own trading strategy. Get acquainted with the novelties, study ready-made trading schemes and improve your individual action plan in the market. Only in this case, the results of trading will satisfy you as much as possible. Also in the network there are often “innovative” automated trading systems based on artificial intelligence, with a profit potential of 300% per month. But such indicators of profitability are far from reality. In fact, experienced traders, when using moderate leverage, do not earn more than 20% per month on trading. This rate of return can even be called outstanding. If there really is an interest in such activities, then it is important to take this fact for granted and not to chase the recipe of super-profits, since this leads to a loss of investment.
Author: Kate Solano, Forex-Ratings.com