Forex or Foreign Exchange market is an online investment system where, as a trader, you can speculate on or hedge movement in future currency exchange rates. The Forex market is the largest financial market in the world. It includes international and local companies, banks, hedge funds, investors, and retail traders. It is open 24 hours a day, 5 days a week.
#ClicktoTweet: Forex it’s the world’s most traded market. It is traded 24h a day and 5 days a week by different institutions, banks, and of course traders.
|💡 Key Takeaways|
One of the main things one hears when talking about how to be successful in trading is discipline. Discipline is everything, so if you are disciplined, you will make it! The issue here is that a big part of discipline is consistency. One of the best things to help you with consistency is having a strategy and sticking with it.
How to know which is the best strategy? There is no single answer to that. Strategies are as different as each individual trader. It depends on what you feel is more comfortable, if it syncs with your personality, plus your routine and, of course, if it gives you excellent results. Just make sure that whatever strategy you choose has been tested before you commit real money to it.
As there is no right answer to the question above, it is important to pick different strategies and try them out. This is a great way to discover the right strategy.
Forex strategies usually include entry signals, but it’s also important to consider:
- Position sizing: this is the total number of units held by a trader or investor in a certain asset (Forex in this case) or the size of a position in a trader’s portfolio.
- Risk management
According to SurfsUp! There are 3 major tips to avoid risk:
- Set limits: Know the maximum amount of money you can afford to lose. All Forex traders want to make profits from trading, but there will be times when traders lose in the market. This is something most, if not all traders experience at one point or another.
Limitations about how much you are willing to lose on any given trade will help you avoid catastrophic losses. The platforms at Tradeview all have a feature called a stop-out which immediately freezes a trader’s account once they lose 100% of the amount initially deposited. This prevents them from going into the negatives.
- Be emotionless: Emotions can severely impact trading performance. If you become emotional, particularly when it’s a loss, you put yourself at an increased risk of making rash decisions, which as a result can lead to even larger losses. Being that the forex market is an inanimate entity, it does not mix well with human emotions. Successful Forex traders move from one trade to the next with no thought of the previous trade.
- Have a safe enter/exit strategy: Less experienced Forex traders should make sure that they have enough liquidity and movement in the pairs they are trading so that they can get in and out of a trade safely.
If you want to know more about risk management, click here.
How to exit a trade: This refers to when is the best timing, which is the best way to do it.
50-Pips a day Forex Strategy
This strategy leverages the early market move of highly liquid currency pairs and the goal is to generate a 50 pip profit. Place two positions or opposite pending orders right after the 7 am GMT candlestick closure. One is activated by price fluctuation and the other is automatically canceled.
To manage the risk, you can also use a Stop-Loss order and place it between 5 and 10 pips above or below the 7 am GMT candlestick. Keep in mind that this is a short-term strategy, which means there is more risk on every movement because of the continuous market fluctuations.
1 – Hour Trading Strategy
Do trading in 60 minutes blocks at most and place buying and selling rules. For the buying trade rule, traders may enter a long position when the histogram reached the zero line (with the stop loss placed at a recent swing low). For the selling rule, traders may place a short position when the histogram reached the zero line (with the stop loss placed at a recent swing high).
4 – Hour Trading Strategy
For this strategy, traders use a 4-hour timeframe (a 4 – hour chart) to identify potential trading signals, locations, or moments where they can buy or sell. They usually use a 1- hour chart as a signal to determine where positions will be taken. The 1 – hour charts are always taken from a timeframe lower to the one the trader is analyzing in the 4 – hour base chart (at least 1 hour).
For this strategy, the trader chooses two sets of moving average lines for the best results. This could be the 55-period Moving Average (MA), and the other could be the 34-period MA.
For an Uptrend, the price action will move above the MA line, the 34-MA line is above the 55-MA line and the MA lines will slope upwards. For a downtrend,the price action will move below the MA line, the 34-MA line is below the 55-MA line and the MA lines will slope downwards.
Daily Chart Strategy
The amount of pips shown on daily charts can change over time. It’s going to vary depending on the daily timeframe. To implement this strategy, you will stay out of the market until you see an enormous opportunity to invest your capital. To implement this particular strategy, locate a trend.
Find a log trend through the Forex Market. As market trends are cyclic, traders will find at least some. To do so traders can study by data periods (some hours, a day. A week, etc.). Then identify the highs and lows to identify the market direction. Traders can also place larger stop losses by taking into account the larger intraday swings in the market.
Weekly Trading Strategy
This strategy gives more flexibility and stability. With a weekly trading strategy. Traders will have a lot of market information and reduce or avoid greater risk and can use charts with different timeframes to make analysis and help with the decision-making process.
By implementing a weekly strategy, traders have a bigger timeframe to implement their trades, to find the best spots to buy and sell, and to read more about the market development thanks to the different forums, blogs, and news available to make informed trading.
Trend – Following Strategy
By implementing this strategy, the trader tries to profit by recognizing and exploiting price patterns. This means by taking profit when support and resistance levels break down as current prices are evaluated having in mind recent highs and lows as the yardsticks, sellers will go for the place where they can get more profit (as recent high approaches) and buyers will go for what they think is cheap (as recent low approaches). Trend-following traders focus on momentum breakouts and try to stay on a trend as much as possible to gain profit.
According to Benzinga: “Trend trading is a popular longer-term forex trading strategy that involves following the prevailing trend or directional movement in the market for a particular currency pair. This strategy often involves buying on pullbacks in uptrends or selling on rallies in downtrends.”Price patterns include concepts like support (market's tendency to rise from a previously established low) and resistance (market's tendency to fall from a previously established high). Click To Tweet
Counter – Trend Following Strategy
Counter-Trading following strategy works with the same principles as the Trend – Following Strategy. The major difference is that in this one, traders aim to buy when there is a new low and sell when there is a new high. This means traders aim to profit from trends that counter the principal or main trend and try to find reversal points, take advantage of them, and make the best trades. Usually, they are implemented on a short or intermediate time-frame (days or weeks).
According to Investopedia: “The strategy involves buying/selling a security that has experienced an impulsive bearish/bullish move hoping a corrective move higher/lower will allow them to sell/buy it back at that higher/lower price.”Trades may use reversal patterns, trading ranges, and momentum indicators to find the right timing to buy or sell. Click To Tweet
The Bladerunner Trade
The Bladerunner strategy is a trading strategy based on the 20-period Exponential Moving Average (EMA). According to Forex Academy: “A market trading above the 20-period EMA shows a bullish bias, while a bearish bias if it is trading below the 20-period EMA. If the price retests the EMA, traders look to go long or short. If the price is trading above the EMA, one can prepare to buy the currency pair once the price drops and tests the EMA line and bounces back up.”
According to Forex Academy, to enter the Bladerunner strategy, the trader needs to identify two criteria first:
- The price must breakout from a range or should already be in a strong trend
- “The price must successfully retest the 20-EMA. If the market is trading above the EMA, the test should be such that the price drops to the EMA, touches it, and reverses in the predominant trend. Finally, if the candle closes above the EMA, it is a sign that the uptrend is still active and intact. A similar concept applies to a downtrend as well.”
To buy: Keep in mind that for this strategy, the Stop Loss should be placed a few pips below the top of the range and below the EMA as well. There is no specific time to take the profit, but the trader needs to make sure that the trade can be closed when the price drops below the 20-period EMA.
To sell: Keep in mind that for this strategy, the Stop Loss should be placed above the Support and Resistance and the bottom of the range. There is no specific time to take the profit, but the trader needs to make sure that the trade can be closed when the price drops above the 20-period EMA.
The image is taken from Forex Academy.
Pop ‘n’ stop trading strategy
According to FXStreet, the trader needs to “Price ‘pops’ beyond a trading range limit and pauses, ‘stops’, before resuming in the direction of the initial breakout. At the point price movement pauses, traders seek candlestick signals that suggest continued direction.”
The image is taken from FXStreet.POPs or Probability of Profit mans the trader chance of making at least $0.01 on a trade. Click To Tweet
Bolly Band Bounce Trading Strategy
This strategy explores the range-bound market possibilities. This means whenever the asset price fluctuates within a certain range. According to DailyFX: “Bollinger Bands can be applied across all financial markets and used in most timeframes, from very short-term periods to hourly, daily, weekly or monthly. The only requirement is that there be sufficient liquidity to see the price-formation mechanism at work in each bar. While broadly applicable, Bollinger Bands are particularly effective in forex trading.”
It is better to use this strategy when the market is relatively quiet or there are no news or events that may provoke drastic changes in the asset’s fluctuation.
Image is taken from Iq Blog.
Image is taken from Iq Blog.
If you went through the strategies and want even more, we’ve developed the chart below for you. On it, you will find trading types that you can also implement. Try them out too and find the perfect strategy for you. One that gives you good results, a strategy you are comfortable with, that syncs with your personality and of course your routine..
|Daily – Pivots||Trade-Timing: Trading movements are done during the day|
Trade before the end of the dayBuy the asset at the lowest price and sell it on the same day at a higher priceObtain profit from the stock’s daily volatility
|Day Trading||Trade-Timing: Trades may last only a few hours|
Trades close before the end of the dayAvoid the risk of large overnight moves
|Dollar-Cost Average||Trade-Timing: Weeks or months. |
Invest a set amount of money in regular time intervals.Find an amount that works for you to try to trade with it every week or every month.
Find a good trend on the latest news and perform your trades according to it. Find moves with a high volume and trade when it begins to decrease.
|News Trading||Trade-Timing: Variable|
Monitor economic calendars for key data releases.Benefit from the notable volatility often seen in the forex market immediately after key news releases. Find moves with a high volume and trade when it begins to decrease.
|Positional Trading||Trade-Timing: Long-term trend following |
Maximize profit from major shifts in price (look at the end-of-day charts).
|Scalping||Trade-Timing: short-lived trade|
Quickly beat the bid/offer spreadSkim just a few pips of profit before exitingSell as soon as you see there is a profitable deal or trade
|Swing Trading||Trade-Timing: Medium-term|
Profit from short-term price patterns (look at bars every half an hour or hour). Capture more market moves by trading both with major trends and also against them when the market is correcting
If you want to try out and experiment with these strategies in the Forex Market create a demo account, and find out which strategy is the right fit for you!