What are the Top 5 Forex Trading Strategies?

This is a great way to learn how the platform works and see if your analytical ability is providing results. Some brokers offer great educational content that can bring you from zero to hero in no time—check out what the top forex brokers for beginners have in store for new traders. Identifying price trends by finding the “highs” and “lows” is key here. If both the high and low price points are moving up together, this means you have an upward trend on your hands and that you should enter a long position.

To secure your profits, use a trailing stop or a fixed profit target. If you’re trading on MetaTrader 4, custom indicators like “DDFX” or “Tidane Trend” are based on the Bollinger Breakout strategy and can help improve your trading outcomes. There are many tools for establishing support and resistance levels, including Bollinger Bands, Pivot Points, Fibonacci Ratios, and more. They can help you generate profits, but you will also have losing trades.

  1. Having multiple indicators on your chart can send conflicting signals, which can lead to confusion, especially for beginners.
  2. This makes leveraging your trades more viable as the risk-reward ratio is manageable.
  3. As you can see in the graph above, the places where the prices stay very high for a long time are the head and shoulders points.
  4. A trend trading strategy remains one of the simplest and best forex strategies.
  5. The list of pros and cons may assist you in identifying if trend trading is for you.

They will also want to assess the benefits of taking several different strategic trading approaches to see what seems best and most suitable overall in their unique situation. The intermittent nature of central bank announcements means this is a strategy with a longer holding period. That allows the flow of funds from one country to move to another and to be reflected in a forex rate move. The above chart shows range opportunities that occurred in the Daily candle chart of USDJPY over 24 days. Forex markets operate on a 24/5 basis but the principle of day trading has carried over to the currency markets. The downward trend line dates from 2018 so is a significant technical indicator.

What Are the Best Forex Trading Strategies?

Successful forex traders know the importance of planning ahead before taking a position in the market. Trading without a plan can be compared to gambling blindly on the market’s direction. While it may work for some time, the chance of long-term success is low. Let’s take a look at a couple of examples of individual charts using a combination of indicators to locate specific entry and exit points.

News Trading

A trader with the right mindset understands that he or she will have plenty of losing trades regardless of experience. Sometimes the market will simply go against your trades, no matter how good you are. A trader with the right mindset emotionally deals with losses well and understands that losing is a natural part of the forex game. The best forex strategy should also allow you to identify the absolute best setups on a daily basis. Quality forex trading requires the execution of quality forex setups. More specifically, you have to understand where prices are, relative to major Price Levels.

Before going into the details of what ‘scalping entails’ it’s worth making a quick note on the nature of the Forex markets. Some of the currency trades are based on fundamental economic activity such as selling USD to buy EUR for an American customer to buy a Mercedes-Benz car from Germany. Speculators also play their part and even a small GBPAUD trade adds to the volume of trades in the market. This creates market liquidity with millions of buyers and sellers engaging in the same market and trading the same price moves. There are many benefits of forex trading so it’s up to you to compare the strategies which may be better suited.

However, it’s also crucial to have a good strategy because not having one is like throwing your money into a well and waiting for those profits to start rolling in (they won’t). Millions have entered the market this year just in the U.S., and brokers are competing for their trust (and money). This competition has made the present moment a perfect time to start trading quickly and cheaper than ever. So, they can be less volatile than other markets, such as real estate.

It’s important to think critically about the tenets of forex market analysis. The weekend analysis will also help you to set up your trading plans for the coming week https://bigbostrade.com/ and establish the necessary mindset. A weekend analysis is akin to an architect preparing a blueprint to construct a building to ensure a smoother execution.

Range Trading

But the following two forex trading strategies are more focused on time and pip goals. Grid trading involves entering several stop-entry orders – orders to enter the market at a less favourable price than the current level – attached above and below the market price. This so-called ‘grid’ of orders ensures that whichever direction the market moves in, an order will be triggered, and a position will be taken. This strategy does come with increased risk due to the volatility that can occur around these events. As more traders change and enter positions around announcements, it can make the market price more difficult to predict.

A trader would go buy a currency with a high-interest rate and sell a currency with a low interest rate. A popular example is going long AUD/JPY (due to Australia´s historically high and Japan´s historically low interest rates). By doing so, the trader forex deposit bonus will receive an interest rate payment based on the size of their position. Day trading could suit you well if you like to close your positions before the trading day ends but do not want to have the high level of pressure that comes with scalping.

The 1-Minute scalping strategy will give you the precision you need to trade when dealing with a faster time frame such as the 1-minute TF. Doing overtrade kicks out your patience and usually leads to the loss of all your forex trading account in a very short time. If you are busy having other works, we recommend you choose long term trading strategies. Long term trading is best to make more money because you will act as an investor in your forex trading account. Day traders often rely on small daily gains and build profit over time. These tools can analyze specific markets such as currency pairs, equities, commodities, and treasuries.

For forex traders, a rangebound market creates the opportunity to put a scalping or swing style of trading into practice. Taking smaller but more frequent profits as the price oscillates between two levels. The best forex trading strategy will ultimately depend on what type of trader you are, and your preferences, as mentioned above. But some currency trading strategies are more widely used and can be adapted to suit individual traders’ needs.

You can’t just slap on random indicators and take reckless trades without any consideration of Price Levels. The key to truly understanding the daily market direction better is the concept of Price Levels. The 4 Hour RSI Bollinger Bands Strategy is a good Forex strategy if you do not want to be glued in front of your computer all day long. This is a non-directional strategy that generates sell and buys signals for the 4-hour time frame. This kind of trading setup will often produce explosive price movements. Candlestick charts are the most common chart types used by Forex traders.

A position trading strategy identifies potential entry and exit levels in the market. This is done by a combination of technical indicator data and fundamental analysis. As a result, traders that use a position trading strategy don’t need to worry about minor price fluctuations or pullbacks. Instead, they occasionally monitor trends to have a holistic view of the market. Every trader has a unique style that depends on what is in the trading plan. Later in the article, we will outline the different factors that influence individual trading styles and forex trading strategies.

If you prefer to use someone else’s plan and copy trades, then you will need to open an account with a broker that includes a social trading platform. The price movement tags the horizontal resistance and immediately rotates lower. Our stop loss is located above the previous swing high to allow for a minor breach of the resistance line. A popular advice in this regard is to set a risk limit at each trade. For instance, traders tend to set a 1% limit on their trades, meaning they won’t risk more than 1% of their account on a single trade. Join thousands of traders who choose a mobile-first broker for trading the markets.