The Best Forex Trading Strategies

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A continuation of the conversation as in the previous article about the best forex trading strategies,

we offer you, dear trader, a distinct set of strategies.

 

Forex Weekly Trading Strategy

While many forex traders prefer Intraday trading because market volatility provides more chances for profits in narrower time-frames,

forex weekly trading strategies can offer more flexibility and stability.

A weekly candlestick provides extensive market data. It contains five daily candlesticks and changes that reflect the actual market trends.

Weekly forex trading strategies are based on lower position sizes and avoiding excessive risks.

 

For this strategy, we will use the Exponential Moving Average (EMA) indicator.

The previous week's last daily candlestick has to be closed at a level above the EMA value.

Today we have to look for the instant when the previous week's maximum level was broken.

Next, a buy stop order is placed on the H4 closed candlestick, at the price level of the broken level.

 

the stop –loss level has to be placed at the nearest minimum point, somewhere between 50 and 105 pips.

The previous extreme value is selected for calculations if the nearest minimum point is nearer than 50 pips.

Here the last week's movement range is required as the profit range.

 

The Role of Price Action Trading in Forex Strategies

To what extent fundamentals are applied varies from trader to trader.

At the same time, the best FX strategies invariably utilize action.

This is likewise recognized as technical analysis.

When it comes to technical currency trading strategies, there are two primary styles: trend following, and counter-trend trading.

Both of these FX trading strategies attempt to gain by picking out and exploiting price patterns.

 

When it comes to price patterns, the most important concepts include ones such as support and resistance.

 

Put plainly, these terms represent the inclination of a market to spring back from previous lows and highs.

Support is the market's tendency to rise from a previously established low.

Resistance is the market's tendency to fall from a previously formed high.

 

This happens because market traders tend to judge subsequent prices against recent highs and lows.

 

What occurs when the market approaches recent lows?

 

Put simply, buyers will be attracted to what they consider cheap.

 

 What occurs when the market approaches recent highs?

 

 Sellers will be attracted to what they view as either expensive or a good place to lock in a profit.

Thus, recent highs and lows are the yardsticks by which current prices are measured.

 

In that respect is also a self-fulfilling aspect to support and resistance levels.

This happens because market participants anticipate certain price action at these spots and move consequently.

As a consequence, their actions can contribute to the market behaving as they had anticipated.

 

Still, it's worth noting these three matters:

1.Support and resistance levels do not present ironclad rules, they are simply a common result of the natural behavior of market participants.

2. Trend-following systems target to profit from the times when support and resistance levels break down.

3. Counter-trending styles of trading are the opposite of trend following—they purport to sell when there's a new high, and buy when there's a fresh low.

 

Trend-Following Forex Strategies

Sometimes a market breaks out of a range, moving below the support or above the resistance to start a trend.

 

How does this happen?

When support breaks down and market functions to new lows, buyers begin with beer forth.

This is because buyers are constantly noticing cheaper prices being established and want to wait for a bottom to be arrived at.

At the same time, there will be traders who are selling in panic or simply being pushed out of their trading position.

The movement continues until the selling is depleted and belief sets off to yield to buyers when it is established that the price will not worsen further.

trend-following strategies encourage traders to buy at the markets once they have worn out through resistance and sell markets,

and when they have gone down through support levels.

In addition, trends can be dramatic and prolonged, too.

 

Because of the magnitude of moves involved, this type of system has the potential to be the most successful Forex trading strategy.

Trend-following systems use indicators to inform traders when a new trend may have got down, only there's no sure-fire way to know of course.

 

Here's the really good news:

If the indicator can establish a time when there's an improved chance that a trend has commenced, you are tipping the odds in your favor.

The indication that a movement might be taking shape is called a breakout.

A breakout is when the price moves beyond the highest high or the lowest low for a specified number of days.

For example, a 30-day breakout to the upside is when the price goes above the highest high of the last 30 days.

 

Trend-following systems require a special mindset, because of the long duration—during which time profits can disappear as the market swings—these trades can be more psychologically demanding.

When markets are fickle, trends will tend to be more disguised and price swings will be bigger.

Hence, a trend-following system is the best trading strategy for Forex markets that are quiet and trending.

A sound example of a simple trend-following strategy is a Donchian Trend system.

Donchian channels were invented by futures trader Richard Donchian, and are indicators of trends being established.

The Donchian channel parameters can be tweaked as you see fit, merely for this case, we will look at a 20-day breakout.

 

Essentially, a Donchian channel breakout suggests one of two matters:

  • Buying if the price of a market goes above the high of the prior 20 days

  •  Selling if the price goes below the low of the prior 20 days.

 

There is an additional rule for trading when the market state is more favorable to the system.

This formula is designed to filter out breakouts that lead against the long-term trend.

In short, you look at the 25-day moving average (MA) and the 300-day moving average.

The way of the shorter moving average determines the direction that is allowed.

 

This rule states that you can only go:

• Short if the 25-day moving average is lower than the 300-day moving average

OR

• Long if the 25-day moving average is higher than the 300-day moving average

 

Trades are exited to entry, but only using a 10-day breakout.

This means that if you open a long position (buy order) and the market goes below the low of the prior 10 days,

here you might want to sell to exit the trade and vice versa in case of a short position (Sell order

 

4-Hour Forex Trading Strategy

One potentially good and profitable Forex trading strategy is the 4-hour trend following strategy.

However, the 4-hour timeframe makes it more suited for swing traders.

This strategy uses a 4-hour base chart to screen for potential trading signal locations.

The 1-hour chart is applied as the signal chart, to see where the actual positions will be held.

 

Always remember that the time-frame of the signal chart should be at least an hour slower than the master chart.

Two sets of MA lines will be preferred. One will be the 34-period MA, while the other is the 55-period MA.

To ascertain whether a trend is worth trading, the MA lines will need to relate to the price action.

 

In the event of an uptrend, the conditions that will be fulfilled include:

 

• The price will continue above the MA courses

• The 34-MA line will continue above the 55-MA line and proceed to behave thusly

• The MA lines will slope upwards for a maximum duration during an uptrend

 

In case of a downtrend, the following conditions will be fulfilled:

• Price action will remain below the two MA courses

• The 34-MA line will continue below the 55-MA line and proceed to behave thusly

• The MA lines will slope downwards for a maximum duration

 

The MA lines will be a support zone during uptrends, and in that respect will be resistance zones during downtrends.

It is within and around this zone that the best places for the trend trading strategy can be found.

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Counter-Trend Forex Strategies

Counter-trend strategies rely on the fact that most breakouts do not evolve into long-term trends.

Therefore, a trader using such a strategy seeks to acquire an edge from the tendency of prices to bounce off previously established highs and lows.

On theme, counter-movement strategies are the best Forex trading strategies for building confidence, because they have a high success ratio.

 

However, it's significant to note that tight reins are needed on the risk management side.

These Forex trade strategies rely on support and resistance levels holding.

But there is also a risk of large downsides when these levels break down.

Constant monitoring of the market is a good idea. The market state that in best cases this type of strategy is stable and volatile.

This kind of market environment offers healthy price swings that are restrained within a scope.

It's significant to mention that the market can change states.

 

For object lesson, a stable and quiet market might begin to trend, while remaining stable, then become volatile as the trend develops.

How the state of a market might change is uncertain.

You should be looking for evidence of what the current state is, to inform whether it fits your trading style.

 

Finding out the Best FX Strategy for You

Many cases of technical indicators have been produced over a long time.

The great leaps made forward with online trading technologies have made it much more accessible for people to build their own indicators and systems.

 

The best forex trading strategies for beginners are simpler, well-established strategies that have gone for a vast list of successful forex traders already.

Through trial and error, you should be capable to learn Forex trading strategies that best suit your own way.

Go ahead and try out your strategies risk-free with any demo trading account. (You can obtain a list of broker companies as you can easily open either a real or demo account at https://www.invstoc.com/brokers

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