Nov 29 2019 22
To succeed in forex trading, there are three fundamental elements that a trader must possess. They are a reliable forex broker, a suitable strategy, and the right attitude for trading. We have discussed how to find the best forex brokers before. Today, we will focus on building yourself the ultimate best forex trading strategies to maximize your profits in forex trading.
If you're new to forex trading, you have to read:
- 7 ways to trade forex for beginners
- 5 forex trading tips that can boost your profits today
- The best forex strategy of the experts
Which forex strategy is the best?
Swing trading is a trading style, mainly in forex and stock trading. Swing traders will rely on the medium-term market fluctuations to make a profit. Imagine a swing. You will see it go up and down constantly. Swing traders take advantages of the up-down movements to make profits.
Swing traders often combine both technical analysis and basic analysis to enter and exit orders. This is quite different from other styles. Because Scalpers and Day traders are mostly interested in technical signals to trade, Position Traders use fundamental analysis to make their investment decisions.
Swing traders will regularly follow market news to identify medium-term trends. Once they have identified the medium-term trend, they will often use the trend channel to trade. They will buy at support levels and close orders at resistance levels for the bull market. On the contrary, for the market to go down, they will sell at resistance and close the support level.
Swing trading is generally less risky than other styles. It can be said that this is the style of experienced traders. They are calm enough not to get caught up in daily transactions. This is also a more leisurely and more effective trading strategy than Scalping and Day trading.
Price Action trading
Price Action (PA) is a trading method that uses trading skills based only on price data without any indicators, news, or analysis. This method is also known as naked trading because the trader only uses a single chart.
Price Action does not use indicators. Traders must know how to "read" and identify important market prices.
All financial markets offer price movements across different time frames. This data will appear on the chart as a Price Action.
Position Trading is a style of trading that holds a position for a long time from weeks to months with the expectation that the market will continue the long-term trend to earn big profits.
Due to the nature of having to search for major trends, Position Traders only trade on large time frames. They want to eliminate possible fluctuations, randomness of the day, and never deal with news unless that news can affect the long-term perspective, or changes the cause into its original position. Most Position Traders operate very little on the market. They mainly enter no more than 10 orders annually. They rarely look at charts and if they do, they only use weekly or monthly ones.
Position trading is not similar to Swing trading. Swing Traders aim only at the medium-term waves to make a profit, while Position Traders aim at the long-term trends. Swing Trader can hold orders from several days to several weeks, while Position Trader would hold several months.
Like other traders, Position traders are forced to trade in the trend because it is the easiest way to make big profits. They make very few orders. The volume of each order will be slightly higher than normal. It can be up to 5% of accounts per order.
Position Trading should not be confused with Buy and Hold. Buy and Hold is a strategy that is even longer than Position Trading, with a position that can hold up to several years. It is more about investing than trading and it is easy to lose a lot when the market falls into a long downtrend. Position Trading is different, they exit as soon as the trend is detected, and in a downtrend, they are short.
50 pips a day strategy
This trading strategy is based on the early movement of currency pairs that have high liquidity. GBP/USD and EUR/USD are the 2 best currency pairs to use this trading strategy. Right after the 7-am GMT candle ends, traders can place 2 pending orders opposite each other. When either position is triggered by price action, the other one will be canceled.
The amount of 50 pips is your goal in terms of profit. The stop loss order should be anywhere from 5 to 10 pips. After entering the order, let the market do the rest with your trade. You can take profit with a ratio of 1: 5 to 1:10 if the trade order is successful, otherwise you will lose a small percentage if the order is a loss order. However, please manage risk closely before entering the order, because when you enter the order with too large volume compared to the account, the loss can hardly be offset can occur.
Day trading strategy
Most professional forex traders prefer to use the daily time frame for trading. The signals in the daily frame will be less disturbed and will give traders time to think and make the most accurate decisions.
With more reliable trading signals, the long-term profit potential of daily frame trading can be huge. With daily time frames you absolutely can not care about random fluctuations of the daily price and short-term news. This trading strategy is executed according to the daily frame based on three major factors:
Positioning the trend
The first rule is you have to identify the trend of the market. An effective way to figure out the price trends is to use the 180-period moving average. By reference from this indicator you can identify the main price trend of the current market
Successful daily trading requires you to be patient because with this time frame there is only 1 tree per day so a price is formed. You must stay out of the market when needed and make sure your capital is ready to take the opportunity when it appears.
Lower leverage and bigger stop loss
The market will have lots of random flipping waves that will make your stop loss threshold hit anytime. Move the stop-loss threshold after resistance to help protect your trade.
News trading strategy
News traders are traders or investors whose decisions are made based on published news.
Hot news, economic reports, or other report releases can have a short-term impact on prices of stocks and bonds, etc.News traders will find a way to make a profit by taking advantage of psychology. market before important news is published or based on market feedback after the news is published.
The economic indicators are published daily during the trading week from Monday to Friday, creating many trading opportunities for traders who specialize in short-wave surfing Breakout or Scalping (earn 10-15 pips quickly).
However, not all index news is tradable, I mean, not every news can follow because 100 news, only about 20% of important news can be traded. with a high chance of winning (on the right track in theory) Mostly only cause small waves or make Sideway move unknown trends.Therefore, before trading according to the economic indicators, it is necessary to prepare See what news is worth trading. The simplest is to see the news, which index is in red color proves more important than the orange or yellow news.
Trend trading strategy
To trade with a trend, we need to understand what a trend is. By definition, a price trend is created when prices maintain a state of continuous movement in many sessions.
Specifically, the price can either increase continuously or decrease continuously. If it is determined that each session will have a specific closing price, the uptrend is when the next day's close is higher than the previous one. In addition, the price peak of the next day will be higher than the peak of the previous day. On the contrary, the closing price and the continually decreasing top and bottom each day confirm a downtrend.
The belief that the price will move in a trend is the guideline to reinforce investors to follow this strategy. But trust needs to be strengthened with concrete experiments.
This is the reason why many trend trading strategies came into being. Development from technology makes it possible to graph formulas of trend identification into graphs through indicators. Thanks to these indicators, we can break the trend into many smaller components. By tracking and measuring all of these factors, we can determine when a trend should be believed and when it embodies.
More details about trend trading strategy
Range trading strategy
Range Trading is a simple trading strategy and is very popular in Forex and stock markets. It is formed when price moves within a certain range and time, forming an even band between high and low points that are almost parallel (price channel). If the price breakout of the above price channel line, the market will tend to go up. If the price (Breakout) of the price channel is below, the market tends to go down.
Once we have identified where the market is heading, it is too easy to make profits.
What is forex trading strategy?
When forex traders mention forex trading strategies, what they mean is the basic analysis and how to turn that into profits. However, this is only a small part of a complete picture. A sustainably profitable forex trading strategy that brings everything from trading signals to place orders, but the overall picture also includes many other things like:
- Order size
- Risk management
- Exit strategies
You may have heard that maintaining discipline in forex trading is a very important aspect. Have doubts about the above? How can you ensure that discipline in trading will bring you profit? The truth is that to become a profitable trader in the long run, you have to be disciplined in trading.
Being disciplined is not certain that you will make a profit, but without discipline it is almost certain that you will fail with this competitive and risky trading career. Therefore, the best forex trading method for you is discipline, follow everything you set even though it may not be profitable for you. Please adjust then one day not far from your trading method will become effective in the forex market.
Analyzing forex trading strategies
Fundamental Analysis, or FA for short, is a method of analyzing the factors that affect the exchange rate, quickly find out the causes of strong market fluctuations and support information / pressure on the market to continue the trend... PTCB always follow the news of the day, so you need to Bookmark the financial-economic website to regularly update new information closely. market variable.
Contrary to FA, technical analysis may not need to pay attention to micro and macro news or economic policies of major countries but only focus on signs on price charts, calendar analysis. history and forecast the next move. Technical analysis using indicators is a supporting tool, the application is written by programmers writing in mq (metaquote) language is quite complex, generally indicators are used to average the data in the process. past to predict future prices.
Similar to the subject of statistical probability and econometrics, the data in the previous period shows an increasing trend, we can estimate the average price in the coming time, or estimate the "real" value through the lines. The moving average, the moving average, assumes that the price has moved through the average of 150 pips a day, but today the breakout fluctuates sharply to 300 pips. The moving averages help to evaluate the true value, which This makes the profit taking more accurate.
How to build forex trading strategies
Combining basic knowledge and technical analysis to build a trading rule, called a Trading System, this is very important to help readers understand the market and know when to participate. the market, avoid jumping into unpredictable variables and a system of trading rules that provide conditions for you to consider whether the current market satisfies these conditions, then join the trade, if not outside the market, there is a famous proverb "if you do not know what to do in the market at this time, it is best not to do anything,'' not every time has the opportunity to trade, We need to learn when we should go on and when we should defend.
Forex trading tips
Use forex indicators
Forex indicators are programs or a piece of codes written in professional language MQ4 (created by Metaquote). Traders can use this language to turn ideas and tactics into transactions. They will make indicators or trading bots that can trade for them automatically. The main task of forex indicators is to analyze the market to give predictions whether the price continues with current trends or not. Based on signals given by indicators, traders can find suitable entry points. Moreover, they can know when not to act. Defense is also a strategy to avoid unnecessary losses.
Use the best trading platforms
In general, the trading platform gives users the ability to make manual Forex transactions with a broker. They often require a stable Internet to work properly and if you need to download the software, it usually runs on computers with Windows operating systems.
Some improved features can be added to the trading platform such as the ability to manage multiple accounts, the functionality of graphs, and the ability to back-test.
Some famous and most common trading platforms in the world:
- Exness MT4/MT5 platform
- XM MT4/MT5 platform
- Saxo Bank SaxoTrader platforms
Use the best trading apps
Forex applications for iPhone and Android have become popular recently. These tools make it easy forex traders to access real-time data, analyze currencies or place trades anytime, anywhere.
Apps for iPhone and Android can be downloaded in app stores, apps for iPhone can be used for iPhones, iPads and Macs, while Android apps can be used on all devices. Support Android operating system.
IPhone applications can be downloaded from the App Store and Android apps from Google Play.
Change your forex trading strategy?
While pursuing a consistent trading strategy is a good thing, when your strategy is broken, will you set yourself a backup strategy?
This is the time when you need to change instead of sticking to the wrong strategies. Acknowledge that Strategy A has failed. Try to set up another trade in the direction that the market breaks the trading strategy.
The data parameters will change constantly, so if you use outdated data you will tend to make a lot of mistakes.
Once you try to break the strategy, you will immediately have to create a new strategy that fits the market conditions. This means you must have at least 2-3 trading strategies. When Strategy A fails, we will fight on Strategy B and so on.
Test multi-time frame strategies instead of fixing a time frame. Usually to Backtest a system, I tend to have to backtest on each timeframe rather than backtest on a timeframe and then abandon the system.
The backtested multi-time frame strategy will help you find the best time frame for that strategy.
Building forex trading strategies can be a fun thing to do. You can try out various things to figure out which one is the most suitable for you. However, the best way is to keep track of the daily news and execute the most suitable strategy for that day.