You may have heard that maintaining your discipline is a key aspect of trading. While this is true, how can you ensure that you enforce that discipline when you are in a trade? One way to help is to have a business strategy that you can stick to. If you are well reasoned and proven, you can be sure that you are using a high quality Forex trading strategy. That confidence will make it easier for you to follow the rules of your strategy and, therefore, help you maintain your discipline.
Most of the time when people talk about forex trading strategies, they are referring to a specific trading method which is usually just one facet of a complete trading plan. While a forex trading strategy provides entry signals, it is also vital to consider:
- Position size
- Risk management
- How to exit a trade
Picking the Best Forex Strategy
When it comes to clarifying which is the best and most profitable Forex trading strategy, there really is no single answer. The best FX strategies will suit the individual. This means that you have to consider your personality and develop the best Forex strategy that suits your needs. What may work very well for someone else may be a disaster for you.
In contrast, a strategy that others have ruled out may be right for you. Therefore, experimentation may be required to discover the Forex trading strategies that work. You can also remove those that don’t work for you. One of the key things to consider is a time frame for your trading style.
There are various types of trading styles (shown below) from short time periods to long time periods. These styles have been used extensively over the years and remain a popular pick on the list of the best Forex trading strategies in 2020. The best Forex traders are always on the lookout for different styles and strategies in their search. how to successfully trade Forex. so that they can choose the most suitable one, based on current market conditions.
- Scalping – These are very short-lived trades, possibly held for only a few minutes. A reseller is looking to quickly beat the bid/offer spread and make just a few pips of profit before exiting and is considered one of the most advanced forex trading strategies out there. This strategy generally uses low time frame charts, such as those found in the MetaTrader 4 Supreme Edition package. This trading platform also offers some of the best Forex indicators for scalping. The 1-minute Forex trading strategy can be considered an example of this trading style.
- Intraday trading – these are transactions that are closed before the end of the day. This eliminates the possibility of being adversely affected by large movements during the night. Day trading strategies are common among beginner Forex trading strategies. Trades can last only a few hours and price bars on charts can typically be set to one or two hours.
- Swing trading – positions held for several days, in which traders aim to profit from short-term price patterns. A swing trader can normally look at the bars every half hour or hour.
- Positional trading – monitoring of long-term trends, seeking to maximize profits from major price changes. A long-term trader would normally look at the charts at the end of the day. The best positional trading strategies require immense patience and discipline on the part of traders. It requires a fair amount of knowledge about the fundamentals of the market.
Below is a list of some of the top Forex trading strategies revealed and discussed so that you can try to find the right one for you.
50 pips a day forex strategy
One of the latest Forex trading strategies to be used is the 50 pips a day Forex strategy, which takes advantage of the early market movement of certain highly liquid currency pairs. The GBPUSD and EURUSD currency pairs are some of the best currencies to trade using this particular strategy. After the close of the 7 a.m. candle GMT, traders place two positions or two opposite pending orders. When one of them is triggered by price movements, the other position is automatically canceled.
The profit target is set at 50 pips, and the stop loss order is placed between 5 and 10 pips above or below the 7am GMT candle, after its formation. This is implemented to manage risk. With these conditions in place, it is now up to the market to do the rest. Day trading and scalping are short-term trading strategies. Remember, however, that a shorter time frame implies greater risk due to the nature of more trades performed, so ensuring effective risk management is critical.
Below is a screenshot of the MetaTrader 4 trading platform provided by Admiral Markets Markets UK Ltd, showing the EURUSD H1 chart of the Zero.MT4 account:
The orange boxes show the 7am bar. In some instances, the next bar did not trade beyond the high or low of the previous bar resulting in no trading setup unless the trader left their orders in the market. The effectiveness of the trading has not been tested over time and merely serves at a platform of ideas for you to build upon. Past performance is not a reliable indicator of future results.
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Forex Daily Charts Strategy
The best Forex traders rely on daily charts for more short-term strategies. Compared to the 1 hour Forex trading strategy, or even those with lower time frames, there is less market noise involved with daily charts. Such charts could give you more than 100 pips a day due to their longer time frame, which has the potential to result in some of the best Forex trading.
Daily trading signals can be more reliable than lower time periods, and the profit potential could be higher as well, although there are no guarantees in trading. Traders don’t need to worry about daily news and random price fluctuations either. The method is based on three fundamental principles:
- Locate the trend: Markets tend and consolidate, and this process repeats itself in cycles. The first principle of this style is to find the prolonged movements within the Forex market. One way to identify a Forex trend is by studying 180 periods of Forex data. Identifying the swing highs and lows will be the next step. By referencing this price data on current charts, you will be able to identify the direction of the market.
- Stay Focused – This takes patience and you will have to get rid of the urge to enter the market right away. You need to stay out and preserve your capital for a greater opportunity.
- Less leverage and larger stop loss – Be aware of large intraday market swings. However, using larger stops does not mean putting large amounts of capital at risk.
While there are many trading strategy guides available to professional FX traders, the best Forex strategy for consistent profits can only be achieved through extensive practice. Here are some more Forex strategies you can try:
1 Hour Forex Trading Strategy
You can take advantage of the 60 minute time frame in this strategy. The most suitable currency pairs to trade with this strategy are EUR / USD, USD / JPY, GBP / USD, and AUD / USD. When it comes to the Forex trading strategy resources used for this type of strategy, the MACD is the most suitable that is available in both MetaTrader 4 and MetaTrader 5.
Buy trade rules:
You can enter a long position when the MACD histogram goes beyond the zero line. The stop loss could be placed at a recent low.
Sell trading rules:
You can enter a short position when the MACD histogram falls below the zero line. The stop loss could be placed at a recent high.
Below is an hourly chart of the AUDUSD. The red lines represent scenarios where the MACD histogram has gone beyond and below the zero lines:
Forex Weekly Trading Strategy
While many Forex traders prefer intraday trading due to market volatility which provides more opportunities in tighter time frames, weekly Forex trading strategies can provide more flexibility and stability. A weekly candlestick provides extensive market information. Weekly Forex trading strategies are based on lower position sizes and avoid excessive risks.
For this strategy, traders can use the most widely used price action trading patterns such as engulfing candles, haramis, and hammers.
One of the most used patterns in Forex trading is the hammer, which looks like the image below:
The opposite of the hammer is the shooting star that looks like the image below:
The chart below shows the weekly price action of the NZDUSD and examples of the patterns shown above.