Improve your trading performance
Forex trading cannot be consistently profitable without adhering to some Forex strategy. It takes time and effort to develop one’s own Forex trading strategy or to adapt an existing one to one’s own needs or trading style. It is very important to choose a strategy or system that you can easily follow with your trading schedule and that can be applied to the size of your trading account. In this overview of Forex strategies you can find different strategies that will be divided into three main categories:
Internal bar strategy
Forex scalping strategy
Support and resistance Forex trading strategy
A popular system with a good win/loss ratio, but the correct entry setup is rarely present. No indicator required, can only be applied from bar charts or Japanese candlesticks.
Advantages
- Clear entry conditions.
- Simple and graphical system.
- High success rate.
Disadvantages
- Difficult to match optimal conditions for implementation.
Implementation
-An internal bar is a bar or candle (also called a “container” bar) that fits perfectly into the first previous bar, including its maximum and minimum values.
-If the index of the current member is 0 and the index of the previous member is 1, the current member, like the inner member, must satisfy the following conditions: High[0] < High[1] and Low[0] > Min [1]. Pay close attention to the “greater than” and “less than” operators.
-A bearish inside bar following a bullish “container” in a well-defined uptrend indicates a short position.
-A bullish inside bar behind a bearish “container” in a clear downtrend indicates a long position.
-For long positions, the stop loss can be set at the minimum value of the “container”, and for short positions, the stop loss can be set at the maximum value of the “container”. Take Profit should be set at the support/resistance level near the trend formation.
Is a simple system that relies on the nearest targets, extremely low stop-loss and a large number of open and closed positions during a short period of time. Not all Forex brokers allow scalping and not all that do are good at it. Scalping may not be suitable for all traders and I personally do not recommend scalping to anyone. The simplest Forex scalping system is represented here.
Advantages
- Good profits to lucky (intuitive) traders.
- No need to deal with technical analysis, fundamental analysis or any other.
Disadvantages
- Spreads spend a large part of the profit.
- The reward/risk ratio is usually very low.
- Not all Forex brokers allow scalping.
- You need a lot of time to trade and observe.
Implementation
-Currency pairs with large inter-day volatility but low spreads are recommended (EUR/JPY, GBP/USD, EUR/USD and USD/JPY are good examples).
-The M1 period is optimal.
-The optimal time for trading is at the intersections of the European/US and US/USD trading sessions. US and US/Asian trading sessions.
-Be prepared to enter positions by watching market activity for 5-15 minutes.
-When you think you have “caught” the current short-term trend, enter the position.
-Set the stop-loss at around 10 pips.
-The rule of thumb for the take-profit target is one or one and a half spreads. Setting the take-profit at such low levels (2-5 pips) is almost impossible, so you will have to watch the position to see the target and close it manually.
A widely used trading system based on horizontal support and resistance levels. These levels are formed with the highs and lows of candlesticks. The break of these levels after the consolidation period gives a signal of a trend. This strategy does not need any chart indicators except for the ability to draw lines (at least imaginary ones).
Advantages
- The stop-loss is low and clearly defined.
- The success rate is quite high.
Disadvantages
The target levels are not clear.
Implementation
-The support level is formed by the lows of two or more candles that form a fairly straight horizontal line without lower lows between them.
-The resistance level is formed by the highs of two or more candles that form a fairly straight horizontal line without higher highs between them.
-Consolidation is a period without any trend, which is forming near the support or resistance level, with rather small candlestick bodies.
-A close below the support level signals the short position.
-A close above the resistance level signals the long position.
-The stop-loss is being set at the minimum of the previous candle (for long positions) or at the maximum of the previous candle (for short positions).
-The take-profit can be set relatively to the stop-loss or as some trailing stop.
Is a simple system based on the crossover of two standard indicators – fast EMM (exponential moving average) and slow EMM. You can use our expert advisor Adjustable MA (free of charge) to trade this strategy automatically in the MetaTrader platform.
Advantages
- The strategy is very easy to trade.
- It uses simple indicators.
- It is very easy to set stop-loss.
Disadvantages
- Moving averages are lagging.
- It is not effective in flat markets.
Implementation
-All currency pairs and chart periods should work.
-Add one exponential moving average to the chart, set its period to 9, apply Close, set the color to red (optional) – it is your fast moving average (MMR).
-Add another exponential moving average to the chart, set its period to 14, apply Close, set the color to blue (optional) – it is your slow moving average (SMM).
Entry conditions
-Enter the long position when MMR crosses MML from below.
-Enter the short position when MMR crosses MML from above.
Exit conditions
-For long positions the stop-loss should be set at the low of the last candlestick before the crossing occurs. For short positions – at the high of the last candlestick before the crossover.
-The take-profit should depend on the stop-loss and should not be less than the stop-loss. I recommend setting TP to 1.5 * SL or 2 * SL.
-If another crossover appears before the stop-loss or take-profit is triggered, close the position.
Is a rather risky system that is based on the direct signals of the Parabolic SAR indicator, which shows the breakout and reversal levels.
Advantages
- This strategy is easy to follow.
- Only one standard indicator is used.
- Entry and exit conditions are given by the indicator.
Disadvantages
- Indicator delay.
- Very risky and not always effective.
Implementation
All currency pairs and chart periods should work.
Add the Parabolic SAR indicator to the chart, set its step to 0.5 and maximum to 0.2.
Entry conditions
Enter the long position when the price connects the indicator from below and changes its direction.
Enter the short position when the price connects the indicator from above and changes its direction.
Exit conditions
Set the stop-loss directly at the level of the indicator, above the price for short positions and below the price for long positions. Adjust the stop-loss with each new bar.
The take-profit should be set at the same value as the stop-loss but you should not adjust it.
Is an interesting system with a fairly low failure rate. It is based on the Stochastic Oscillator indicator, which signals a fatigue or a change of the trend. It means that you will almost always enter pull-backs, ensuring fairly safe stop-loss levels.
Advantages
- Simple to follow.
- Only one standard indicator is used.
- Safe stop-loss levels.
Disadvantages
- Take-profit level is not optimal.
Implementation
All currency pairs and chart periods should work but long periods are recommended.
Add Stochastic Oscillator indicator to the chart, set its %K period to 14, %D period to 7 and deceleration to 7, use simple MM method.
Entry conditions
Enter the long position when the cyan line crosses the red line from below and both are located in the lower half of the indicator window.
Enter the short position when the cyan line crosses the red line from above and both are located in the upper half of the indicator window.
Exit conditions
Set the stop-loss at the local maximum if you are trading long and at the local minimum if you are trading short.
The most favorable take-profit level is between 1 * SL and 1.5 * SL.
Close the position immediately if another signal is generated.
Free Trading Course
Since April 2017 I have been gradually publishing a free Trading and Forex course on my main YouTube channel that I do on the go and when I can, since making a video of this type takes me many hours of work. Each video is about 1 hour long. Although they are long videos, it is actually a short time to explain important things about trading.
