How to Choose the Best Forex Trading Strategy
Quite often, traders will rely on trading strategies that haven’t been tested thoroughly, setting themselves up for a failure. The truth is, you can spend hours searching all over the internet for the right strategy – and have no luck finding one.
The only solution is to try out the leading strategies for yourself and see what actually works.
Forex trade strategies and goals
Before discussing trading setups and possible strategies, we need to first understand why one would consider trading Forex in the first place. There are two main reasons: hedging and speculation.
Hedging refers to companies protecting themselves from losses. They get their daily profits from any overseas country (that has paid revenue in a foreign currency). Then, they transfer it back to their own country, expecting fluctuation in the currency.
This practice isn’t really relevant to Forex strategies.
On the other hand, speculation refers to predicting a move that a company might make in a certain situation. If done correctly, these predictions greatly improve trading results.
Speculation is what day trading is all about. With the help of decent strategies, you can progress in the Forex trading world and ultimately develop your own trading strategy. The downside is that this is a time-consuming and difficult process.
The good news is that there are pre-made strategies available for you to try.
Although it is better to play it safe, especially if you’re new to the game, you need to change your tactics from time to time. This may allow you to see a profit margin you could have missed otherwise.
What is the best Forex trading strategy?
Here we have a few methods that will help you quickly change tactics and gain pips.
We’re going to provide you with an overview of strategies that have worked for many years, so that you can research the ones that are of interest to you. These are the Forex trading strategies that work, and they have been proven to work by many traders.
The Bladerunner Trade
This is suitable for all timeframes and currency pairings. It is, at this moment, one of the trending strategies in the market. The Bladerunner Trade is a price action strategy.
Daily Fibonacci Pivot Trade
This trade uses daily pivots only. However, it can be extended to a longer timeline. It combines Fibonacci retracements and extensions. Fibonacci trade can incorporate any number of pivots.
Bolly Band Bounce Trade
This strategy is perfect for a ranging market. If you use it in combination with confirming signals, it works really well. If you are interested in Bollinger Bands strategy, this one is definitely worth checking out.
Forex Overlapping Fibonacci Trade
These strategies are a favourite among many traders. The reliability tends to be a bit lower, but used in combination with appropriate confirming signals, they become extremely accurate.
The Pop ‘n’ Stop Trade
Trying to chase the price when it goes upside rarely works. That is, unless you know this trick. This Forex trading strategy gives you a simple tip so you know whether the price will continue to rise or decrease.
Trading the Forex Fractal
This is more of a concept rather than a strategy, but you need to know this if you want to understand what the prices are doing. This offer you a lesson in market fundamentals, which will really help you to trade more effectively.
Currency trading strategies are a game of trial and error. It may be worth trying out the strategies from list above to see if any work for you. However, we will look at two further strategies which tend to be more common than the ones previously mentioned.
What’s more, they have been consistently proven to work.
Scalping in a nutshell
Many consider scalping to be tiresome and time-consuming. Indeed, not every trader can successfully pull it off. It may really seem that scalping takes the fun out of the best Forex strategy.
On the other hand, it really does work.
If you are on the lookout for a reliable Forex strategy, this might be your safest choice. As a day trader, you will dip in and out of the market once or twice a day and always carry a position into another period. Ideally, the profit will come back.
If you’re a savvy scalper, this process is usually far more frenetic. You will trade in and out of the Forex markets several times per day. The profit margins may appear small but they’re also steady.
The more you scalp, the more you will make.
For example, if you trade EUR/USD pair and the price of either currency jumped up 20 pips, you get a slight profit for taking an action.
The result is a tiny profit, but that is a profit made in a single minute. The amount and consistency of your overall profits depend on your commitment and reflexes.
If scalpers want to truly take advantage of the news releases, they should wait for the most important ones. When you scalp, you need to remember when GDP, unemployment figures and inflation rates are about to be released.
These factors affect trading strategies, particularly in the currency trading market, where scalping can be most profitable.
Positional trading – consistent Forex trading strategy
While scalping can certainly teach you to trade the currency market, it takes a lot of time and effort. When you scalp, you have to sit in front of the computer for long periods of time.
Positional trading is an interesting way to trade Forex online. While it can take you only a few hours a week, it can provide you with quite extensive profits.
So how does positional trading work?
Positional trading is all about having your positions opened for a long period of time, so you can catch some large market moves. The rule of thumb is to avoid using high leverage and keep a close eye on the currency swaps.
Sometimes these swaps can cost you more than your actual profit.
With positional trading, you can learn not only Forex trading strategies but also the skills you need to become successful. It is a good method of achieving high profits, but it can also put your emotions to test.
Traders may feel the stress from having their funds affected by short term moves. Quite often, traders will have to fight the urge to close their trade when it’s losing points.
With positional trading, you have to dedicate your time to analysing the market and predicting potential market moves. However, there is almost no time spent on the execution of your trading strategy.
Simply start by picking up the pair you know the most about. Calculate the possible volume of your transaction, see what the swap is and how you can break even, analyse the best moment to enter the trade.
And when this moment comes, go for it.
There are many Forex strategies, yet it is hard to say which is the best one. Ultimately, every trader has to decide for himself.
Forex is a process of trial and error. To have a chance at becoming successful, you have to get out and try every strategy. Experiment, change and improve before you choose the one strategy that suits you the best.
Chances are, it’s going to be the strategy you developed yourself.