Foreign Exchange or currency trading is very risky. Trading into this market has so much risk that most forex traders fail and end up losing. It is estimated that around 96% of traders lose money in this market and end up quitting. What is the reason behind most people fail in this market? There are two main reasons, why traders fail in the foreign exchange market:
- No trading strategy
- Losses due to brokers
There are many other reasons why a trader loses his money in this market, but these two are the main reasons behind loses faced by forex traders. A new trader is unaware of forex market strategies and trading techniques, he also doesn’t know whether he should trade on public holidays or not. It is obvious for a brand new trader to have such confusions.
Another important thing comes when we are talking about forex trading is, finding a regulated brokerage platform. Nowadays, this is very important due to increasing scam brokers, so you should check out reviews of a broker before signing up into his platform and you can also test out the service provided by the broker through the help of demo account.
Having no trading strategy is just like shooting in the dark, you don’t know what you want to achieve by trading. Hence, traders need to have trading strategies.
FOREX Trade Strategies and Goals
The reason why forex trading strategies are important due to two main reasons: hedging and speculation. A hedge is an investment to reduce the risk of price movements; companies are protecting themselves from losses.
While speculation is the prediction of a move a company might make in a certain situation. If these predictions did correctly, it can improve trading results greatly. Speculation is what a day trading is.
With the help of some decent forex trading strategies, you can progress in the forex trading world and ultimately start developing your own foreign exchange trading strategy, but the downside here is, it is time consuming and difficult process.
To become a forex trading expert and start developing own trading strategies, you need to gain more experience and learn the market in detail. But, the good news is there are many pre-made forex trading strategies available for you to try.
One thing to remember is, if you are new to this market, you need to change your tactics from time to time.
Best FOREX Trading Strategies
We will provide you with an overview of some best trading strategies that have worked for many years so that you can research and implement the ones you are interested in. Here are top forex trading strategies that work and they have been proven to work by many traders:
I call these first two A and B because these are the ones I currently use and will probably use a version of them for the foreseeable future.
A. 5/13/62 EMA Strategy
This isn’t a new strategy by any means. I now use mainly the 13 & 62 as confirmations before looking for the entry to ride the wave (trend).
In its basic form the 5/13/62 is just a multiple moving average crossover system. I have now (after Steve Gregor’s Teachings) eliminated the 5 EMA and now use the 13 and 62 mostly on the 62.
Below you can see a crossover (yellow circle). This crossover went 50 pips I usually only use a max of 20 pip SL and that is without any real analysis. If I use the B. strategy (New Paradigm Trading) I use a 10 pip stop loss. They don’t all do this obviously and you won’t win all trades but if done right you should win more then you lose and some can go for 100+ pips. Even with a 20 pip SL that can be upwards of a 15% return on one trade.
Also before the entry I circled you can see some of the free indicators I have created that show divergences (green line) and buy signal (the dark green diamond) that would have got you in the trade possibly even earlier. These indicators are 100% free just sign up for our email list.
B. New Paradigm Trading
This kind of trading is more of a way of life then a strategy. The tools that are most used are Pitchforks, Fibonacci, Harmonics, and Trendlines. You throw in some Waveology using the TAB29 indicator created by Steve Gregor and you have yourself an amazing system that enables huge profit per pip potential. If you are interested in a free trading facebook created by Steve Gregor get into contact with me so I can add you to the group. He literally gives away indicators and strategies along with lots of free teachings on mindset and trading the new paradigm.
With new paradigm trading you are in and out of trades and can go about your day. Your main focus is on the precise entry after that managing a trade can be very easy. This means more time with the family and living your life instead of being on the charts 24/7. Also with NP trading you are using a 10 pip stop loss the majority of the time. 3% into a 10 pip SL means your gains will be 3 to 5 to 10 times more then that of old paradigm trading.
Credit: Steve and Clay on photo
1. THE BLADERUNNER TRADE
The Bladerunner trade is the forex price action trading strategy which uses pure price action to find entries. This forex trading strategy is known as the Bladerunner strategy because it cuts the price action in two like a blade.
For this forex strategy, we won’t need any off-chart indicators (indicators that are located below the price chart) like, Stochastic, Awesome Oscillator or MACD. This is strategy did not require these indicators, but there is only one indicator which is very essential in this strategy, and it is a 20-period EMA (Exponential Moving Average).
In the Bladerunner strategy, support and resistance levels also play a crucial role during its implementation. Similar to other strategies out there, it should be adjusted to the time of the day you trade.
In this strategy, if the price is above the exponential moving average and retests it, the continuity in the upward movement can be expected. If the price is below the EMA and continues to stay below, the continuity in the downward movement could be expected. And, when the price moves through the EMA and on the other side of the curve candle closes, the reversal in trend can be expected. So, in other words, the Exponential Moving Average plays an important role in a moving support/assistance level.
Here are some important factors to consider about Bladerunner trading strategy:
- Consider the direction of the current trend
- Spot at least two indicators
- Focus on the price levels
- Is the price trending?
- Use other tools for analysis to make it more effective
- Set price levels along or above EMA
- Tune out from watching financial announcements
- Use the strategy with your preferred on-chart indicators
2. DAILY FIBONACCI PIVOT TRADE
Another forex trading strategy is Daily Fibonacci Pivot Strategy. The Daily Fibonacci Pivot Strategy uses standard Fibonacci retracements in confluence with the daily pivot levels in order to get trade entries. It combines the use of both the popular Fibonacci sequence and pivot point to trade forex. Fibonacci trade can incorporate any number of pivots.
The Fibonacci level can be utilized as profit targets for accessible open trades. Pivot points are calculated from the preceding day’s data which incorporates the preceding day’s high, low and close. The estimation of key pivot points (PP) is done by calculating the mean value of high, low and close of the price action of the previous days.
Many forex traders are familiar with how to trade through Fibonacci retracement tool but many of them don’t know how to use the Fibonacci pivot strategy tool. Fibonacci pivot strategy help traders to recognize potential entry points and also helps in recognizing profits entry points. It also helps traders to forecast future price action.
The Rules for Purchasing:
- To get more accurate, don’t purchase till the daily close, though, it is not mandatory.
- Stop loss is equivalent to 10 pips under the pivot point.
- Take profit is equivalent to 50% retracement.
- Do not buy until the 100% Fibonacci extension is attained.
The Rules for Selling:
- Wait for the 100% Fibonacci extension is attained.
- For improved accuracy wait for the daily close, but it’s not mandatory.
- Stop loss is equivalent to 10 pips above the pivot point.
- Take profit is equal to 50% retracement.
3. BOLLY BAND BOUNCE TRADE
Bolly Band Bounce Trade is perfect in a ranging market. Many forex traders use it in combination with confirming signals to a great effect. The Bolly Band Bounce trade is based on the observed behavior of price where the Bollinger Bands form a kind of limit for the short term price movement.
This trading strategy is not effective in a sharply trending market, but it is effective when the market is in range. The first thing a trader needs to consider when trading this strategy is to determine that the price is indeed in the range. Bollinger Band Bounce strategy can be traded by purchasing when the price is at the lower Bollinger Band and sell deals are recommended when prices are near to the upper Bollinger Band.
Do you know how to trade Bolly Band Bounce strategy effectively? Here, we have elaborated three ways traders can trade the Bolly Band Bounce Trade Strategy more effectively:
I. Using Candlesticks for confirmation
The first method to improve the effectiveness of the Bolly Band Bounce Trade Strategy is to use candlestick patterns as a confirmation that prices will bounce off the outer bands.
II. Using Divergence
Another effective way to trade with Bolly Band Bounce Trade is using divergence. When the prices are trading near the outer bands, we compare the highs and the lows to the oscillator & when we find divergence, the appropriate position would be taken.
III. Resistance/ Support
The strategy can also be used in conjunction with support/resistance levels, both horizontal and trend lines.
So, we can conclude that the Bollinger Band Bounce strategy for trading is a versatile and flexible strategy to be used in any type of technical analysis.
4. FOREX OVERLAPPING FIBONACCI TRADE
The Overlapping Fibonacci is the trading strategy most of the traders come to after having Fibonacci for some time. The idea of Overlapping Fibonacci trading strategy is exciting among traders. Because very often all you need in order to trade using this strategy is: two strong Fibonacci levels at an area of known support and resistance.
The thing that makes this strategy highly appreciated is that the strategy can be applied to any financial instruments, from commodities, indices, currency pairs to crypto currencies. In this trading strategy, the larger the time duration is, the more accurate the trading opportunities are.
There is also an opportunity to trade based on the confluences that occur at the Fibonacci extension levels. Also, remember to trade with the confluence of other events or signals if they are available. Some of the most powerful supporting signals are Pivots, Resistance/Support levels, Fibonacci levels, Candlestick patterns, Trend and Round Numbers.
As we know, for any forex trading strategy we need to follow some rules. So, here are some rules to follow when trading this strategy:
- The prices must show the sign of reversal when touching the overlapping barriers.
- The candle of confirmation must be fully close before a signal is confirmed as valid.
- The stop loss must be placed above/below the nearest Fibonacci level. The take profit can be set twofold compared to the stop loss.
- Only a single position should be entered at a time.
5. FOREX DUAL STOCHASTIC TRADE
Stochastic merely a tool used to confirm signals from other indicators. However, when two stochastic indicators with different settings meet each other, they turn into a very powerful analysis tool. Forex dual stochastic trading strategy is based on the use of two stochastic Oscillators with different settings.
The Dual Stochastic strategy relies on the use of two off-chart stochastic oscillators. When the strategy is used with the appropriate parameters, a system programmed to monitor the dual stochastic indicators can signal when the price of a forex pair is trending yet overextended during the time period of short-term retracement.
The forex dual stochastic trading strategy focuses on trading when the two indicators are showing extreme opposite values. When the fast and slow stochastics are at or near the designated limit values, it signals the opportunity for trading. While, forex stochastic oscillator is of three: fast, slow and full stochastic oscillator.
The Basic Stochastic Oscillator:
%K is 100x [The Closing Price – Lowest Price of N time periods] / [The Highest Price of N time periods – Lowest Price of N periods]
%D is 100 x [The Highest Price of (N minus a lesser number) time periods] / The Lowest Price of (N minus a lesser number) time periods]
The first equation calculates the range between the high and low of the price of forex pair over a given time period. The price of the forex pair is expressed as a percent of that range: 100% represents the top limit of the range while 0% represents the bottom limit of the range in a given period of time.
6. TRADING THE FOREX FRACTAL
The concept of trading the forex fractal is way more than just a strategy idea. It is one of the best and effective ways of understanding foreign exchange price action and trade flows at their most fundamental levels.
Normally, trading with fractals is extensively used by large market players and it is the best indicator of the fractals’ reliability. The combinations of fractals have such characteristics as scaling, self-similarity, and memory of the <<end conditions>>, and, therefore, they can be used successfully for making price forecasts.
The creator of fractal geometry is Benoit Mandelbrot, French economist, and the mathematician; he was the first person who has paid attention to the repeating price formations.
How to use Fractals in Forex?
The fractals (fractus) mean a steady and scalable design of irregular shape emerging on any data. In the financial market, trade fractal is the candle pattern formed by 5 (at least) or more candles, maximum or minimum of the central candle of which exceeds the extremes of the neighboring candles.
The emergence of fractals means the beginning of a new price pyramid and it is considered as a trading signal. A fractal up (signal to enter to buy) is the setting in which 5 (at least) consecutive bars form a pattern, where the highest maximum is shown by an average candle. While the fractal down is the reverse pattern made by 5 (or more) consecutive candles, the average from which shows the lowest minimum.
7. LONDON HAMMER TRADE
London Hammer Trading strategy implies all that is covered in the London trading market. The time when the forex market opens, its called the golden period of trading as most of the profits start at that very moment. London’s forex market sets the bar for how the market will go and what may be normal, the market opens at the night in North America, so traders have to remain engaged and proceed with caution.
The London Hammer forex trading strategy best applies to commodity trading where gold is seen as the most valuable asset that can be traded in the market and as a result, most of the traders use it for the trading of gold and other commodities, where gold is the crucial asset to trade with.
Why was the London Hammer Trading Strategy formulated?
London forex market’s volatility prompted the traders to come up with a strategy called London Hammer Trade Strategy. For the reason, one needs to watch the rejection bars, that are made because of resistance once the value leaps over the range. Along these lines, depending on where the Hammer is heading, one should buy or sell while pointing 2:1 profit loss ratio.
How to use the London Hammer Trading Strategy effectively?
For this strategy, a trader must have a proper grasp over the candlestick analysis to make the effective use of this strategy, which will help in finding the resistance lines and support lines. Here, the price is not of utmost importance, the resistance lines have got some roadblocks both above and below the chart.
While utilizing this strategy, you should put in your order in a matter of seconds, as the price will change significantly within moments. And, it is also to start this trading strategy with a demo account first.
Hence, we have seen some of the top foreign exchange trading strategies. These trading strategies are used by most of the forex traders nowadays. And, by implementing these strategies, you can really progress in the forex trading and ultimately start developing your own trading strategy. But, to start building your own strategy, you need to invest your time and gain as much knowledge as you can of different strategies.
If you are new to the market and cannot build your own strategy, there are many pre-made strategies by using that you can progress in this market. Another important thing you need to consider before implementing trading strategies is, you need to try out these strategies in a demo account first, that will give you a basic idea of your implemented trading strategy.