Why is it necessary to use a trading strategy?
Every trading manual or instruction insists that a trading strategy is necessary for successful trading. First of all, when you select your strategy you gain greater clarity of the trading process, which helps minimize trading risks. Profitable Forex strategy is an instruction, and if a trader follows it strictly, he/she will avoid many mistakes, which may take place because of the market unpredictability.
Your strategy will prompt you when you need to enter or exit the market. Your strategy will tell you what actions you need to undertake in various changeable market conditions, as your trading strategy is suited for any situation.
At the same time, a trader shall be familiar with the new trading strategies and adjust his/her strategy taking into account new methods and new market conditions. Note that it is necessary to make adjustments very thoroughly and carefully, they shall be always justified by the market conditions.
Types of trading strategies
- Trading strategies can be based on various methods. The most popular trading strategies are
- Trading strategy based in the technical indicators
- Trading strategy based on the Bollinger bands
- Trading strategy based on the moving averages
- Trading strategy based on the technical patterns
- Trading strategy based on Fibonacci indicator
- Candlestick trading strategy
- Trend trading strategy
- Flat trading strategy
- Trading strategy based on the fundamental analysis
Three most profitable Forex trading strategies
1. Scalping strategy “Bali”
This trading strategy enables you to trade on H1 with the currency pair EUR/USD. You will need to use indicators Linear Weighted Moving Average (48), Trend Envelopes_v2 (2) and DSS of momentum (parameters: 18, 16, 3, 8).
A yellow line on the chart is a Trend Envelopes indicator. Track a moment when a candlestick closes above this line, the indicator will be below the instrument price. On the same candle at the closing hour the price will be above the line Linear Weighted Moving Average. On the chart the main line of the DSS of momentum indicator will be marked green and it should be located above the signal line. A order buy is placed when all the above conditions are fulfilled. After that a trader shall place a stop loss of 25 points and a take profit order of 50 points.
2. Candlestick strategy “Fight the tiger”
This is a profitable weekly trading strategy, which can be used for different currency pairs. It is based on the springy action of the price. We can use a chart in any terminal and a timeframe W1. A trader shall evaluate the size of the candlestick body of different currency pairs (AUDCAD, AUDJPY, AUDUSD, EURGBP, EURJPY, GBPUSD, CHFJPY, NZDCHF, EURAUD, AUDCHF, CADCHF, EURUSD, EURCAD, GBPCHF) and choose the biggest distance between the opening and the closing of the candlestick within the week. In case of the bearish trend, a trader opens a long positions, and vice verse.
Do not forget to place stop-loss of 100-140 points and take profit order of 5-70 points.
In the middle of the week you can close your orders (if it has not been closed by the stop-loss or take profit orders. After that wait for the beginning of the next week and place a new order. Do not place orders at the end of the week.
3. Profit trading system with moving average
This strategy is based on three moving average lines (10, 25 and 50) and an indicator Parabolic. For your convenience you can mark three average lines in different colors. Parabolic will be used as a filter to refine signals from the moving averages. If you are going to place a buy order make sure that Parabolic is in the bottom.
If you are going to open a short positions Parabolic shall be at the top. We define entry point by the behavior of the moving average with the period 10. This moving average shall cross the other two moving average lines with the periods 25 and 50.
If a moving average with the period 10 crosses the lines with the periods 25 and 50 from bottom to the top it is time to open long position. Use stop-loss with the trailing stop.
Features of the effective Forex strategies
What are the features of the effective trading strategy?
- Minimum lagging indicators.
- Simplicity. It is very important to understand the main principles of your trading strategy. It is better to be an expert of the simple strategy than to use complicated strategies, which you do not clearly understand.
- Special features. A strategy shall be adjusted to your trading method, your personality and special circumstances.
In order to be successful in the Forex market a trader shall choose the right trading strategy. Learn new methods, look through the existing methods and improve the trading strategy, which you have selected for yourself, it will help you achieve the desired success. Good luck!
The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteForex. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.