5 most effective Forex strategies
Every professional trader knows that among numerous Forex strategies there are some, which can be considered the most reliable, profitable and easy to use. In this article we will familiarize you with the proven over time, transparent and efficient strategies on the MT4 terminal (which is the most popular). All these strategies are equally effective in the currency market and they all have won traders’ recognition.
Strategy “Currency Сarry Trade”
Using this strategy you can earn profit on the difference between interest rates of the currencies selected by you. In other words, you will earn money on currency swap. In this strategy it is very important to be aware of the world economic situation and to track changes in the interest rates introduced by the Central banks.
The bigger the difference in the interest rates of the currencies selected by you, the greater is your profit.
A procedure is as follows: a trader borrows some amount of money in the currency with relatively low interest rate, and opens a deposit in the other currency at the higher interest. The difference between the interest rate makes trader’s profit. The instruments used in this strategy are the pairs EUR/USD, USD/GBP. Exotic currencies are not often used in this strategy, due to high volatility and risks.
In this Forex strategy we use MT4 for monitoring price movement in a currency “channel”. The limits of the channel are defined by the highest and lowest price levels of the currency selected by you. At some moment the price breaks out one of these lines, which are either support or resistance levels.
Traders, who use “Breakout strategy,” have two choices.
As the first option traders place pending orders, which mean that they presuppose behavior of the price and evaluate up to what point the price may go. Your order will be activated when the price reaches this point. You do not need to spend much time at the computer. The second option involves active trading: we constantly monitor the price movement and make trading decision “at spot” when the price reaches the level you wanted. Both options have pros and cons. The first option helps you save your time but increases risk of loss in case of the unpredictable movement in price. The second option requires all your time and attention but enables you to make the right trading decision.
Channel trading strategy
This strategy is based on the fluctuation of the currency pair. There are three possible scenarios in the market. The pair can move in the “bearish”, “bullish” trends or move flat (trading is difficult if price fluctuation is very low).Note also that, the trend may change, as the price may sharply move in the opposite direction and after that the price may return to the previous trend.
Therefore, we monitor the price movement and when the price approaches the lower limit we place buy orders, when the price goes up to the upper limit, we place sell orders.
Please note that, in the modern world flat market is a very rare situation, which means that a trader can always apply channel trading strategy.
A very popular strategy designed for trading on the short timeframes. When using this strategy a trader is very vulnerable to changes in the Forex market.
A slightest movement will lead to a closure or opening of a deal.
In this case a trader’s profit will be only a few pips. As you can see, this strategy requires some patience, attention and perseverance from you. You might not earn big money using this strategy, but at the same time, you will definitely not lose much money either. Usually beginners prefer this strategy as it is effective but not too risky. After gaining some experience, traders usually switch to the other strategies.
Forex news trading strategy
You must be aware of all the news and developments of the world economy, which can affect market volatility. All decisions made by the Central banks, speeches and statements made of people of influence, experts in economic and financial fields and leaders of the countries. We must also know changes in inflation rate, GDP and business activity index and interest rates. You shall cover all basic data and use this data when placing trading orders. It is very important to respond promptly to the news, which means that you shall know exact time of the news release, so that you will know the news before it will become available to the general public. You can place pending orders or trade online. The risks are the same. News trading strategy is widely used by professional traders. Sometimes this strategy is combined with the other strategies on MT4.
Best regards and good luck in trading!