Most Successful Forex Trading Strategy

Identifying a successful Forex trading strategy is one of the well-nigh important aspects of currency trading. In general, there are numerous trading strategies designed by different types of traders to help you lot brand profit in the market.

However, an individual trader needs to find the all-time Forex trading strategy that suits their trading way, as well as their hazard tolerance. In the terminate, no ane size fits all.

In order to make profit, traders should focus on eliminating the losing trades and achieving more winning ones. Whatever trading strategy that leads you lot towards this goal could prove to exist the winning ane.

How to Choose The Best Forex Trading Strategy

Before we proceed to discussing the most popular Forex trading strategies, it's important that we understand the best methods of choosing a trading strategy. There are iii main elements that should be taken into consideration in this process.

Time frame

Choosing a fourth dimension frame that suits your trading style is very important. For a trader, in that location'southward a huge difference between trading on a 15-min chart and a weekly chart. If you are leaning more towards becoming a scalper, a trader that aims to benefit from smaller market moves, then y'all should focus on the lower fourth dimension frames east.g. from ane-min to 15-min charts.

On the other manus, swing traders are likely to utilise a iv-hr chart, also as a daily chart, to generate assisting trading opportunities. Hence, before you choose your preferred trading strategy, make sure you answer the question: how long practise I want to stay in a trade?

Varying time periods (long, medium, and short-term) correspond to unlike trading strategies.

Number of trading opportunities

When choosing your strategy, you lot should reply the question: how frequently do I desire to open positions? If you are looking to open a higher number of positions and so you should focus on a scalping trading strategy.

On the other mitt, traders that tend to spend more fourth dimension and resources on analyzing macroeconomic reports and fundamental factors are likely to spend less time in front of charts. Therefore, their preferred trading strategy is based on higher time frames and bigger positions.

Position size

Finding the proper trade size is of the utmost importance. Successful trading strategies crave you to know your gamble sentiment. Risking more than yous can is very problematic as information technology can lead to bigger losses.

A popular communication in this regard is to fix a gamble limit at each merchandise. For instance, traders tend to prepare a 1% limit on their trades, meaning they won't hazard more than 1% of their account on a single trade.

Forex trading - ThinkMarkets

For example, if your business relationship is worth $thirty,000, yous should risk up to $300 on a single merchandise if the run a risk limit is set at 1%. Depending on your risk sentiment, you can move this limit to 0.five% or ii%.

In general, the lower the number of trades you are looking to open the bigger the position size should exist, and vice versa.

3 Successful Strategies

By now, you have identified a time frame, the desired position size on a unmarried trade, and the approximate number of trades you lot are looking to open over a certain period of time. Below, we share 3 pop Forex trading strategies that take proven to be successful.

Scalping

Forex scalping is a pop trading strategy that is focused on smaller market movements. This strategy involves opening a large number of trades in a bid to bring small profits per each.

As a result, scalpers work to generate larger profits by generating a big number of smaller gains. This approach is completely opposite of property a position for hours, days, or fifty-fifty weeks.

Scalping is very pop in Forex due to its liquidity and volatility. Investors are looking for markets where the price activity is moving constantly to capitalize on fluctuations in small-scale increments.

This type of trader tends to focus on profits that are around 5 pips per trade. All the same, they are hoping that a large number of trades is successful equally profits are constant, stable and easy to achieve.

A clear downside to scalping is that you cannot afford to stay in the trade as well long. Additionally, scalping requires a lot of time and attention, as you lot take to constantly analyze charts to observe new trading opportunities.

Let's now demonstrate how scalping works in practise. Beneath yous see the EUR/USD 15-min chart. Our scalping trading strategy is based on the idea that we are looking to sell any attempt of the toll action to motility above the 200-period moving average (MA).

EUR/USD 15-Minute Chart

In most 3 hours, nosotros generated four trading opportunities. Each fourth dimension, the price action moved slightly above the 200-menstruation moving average before rotating lower. A stop loss is located v pips above the moving average, while the price action never exceeded the MA by more iii.5 pips.

Take profit is also 5 pips every bit we focus on achieving a large number of successful trades with smaller profits. Therefore, in total 20 pips were collected with a scalping trading strategy.

Day Trading

24-hour interval trading refers to the process of trading currencies in one trading solar day. Although applicable in all markets, day trading strategy is more often than not used in Forex. This trading arroyo advises yous to open and close all trades within a unmarried day.

No position should stay open overnight to minimize the risk. Unlike scalpers, who are looking to stay in markets for a few minutes, day traders usually stay active over the day monitoring and managing opened trades. Day traders are by and large using 30-min and 1-hour fourth dimension frames to generate trading ideas.

Many day traders tend to base of operations their trading strategies on news. Scheduled events e.g. economic statistics, interest rates, GDPs, elections etc., tend to have a strong bear upon on the market.

In addition to the limit set on each position, twenty-four hours traders tend to set a daily risk limit. A mutual decision among traders is setting a 3% daily risk limit. This will protect your account and capital.

GBP/USD 1-Hour Chart

In the nautical chart above, we see GBP/USD moving on an hourly chart. This trading strategy is based on finding the horizontal back up and resistance lines on a chart. In this particular case, we are focused on resistance as the cost is moving upward.

The price motion tags the horizontal resistance and immediately rotates lower. Our end loss is located above the previous swing high to allow for a small-scale breach of the resistance line. Thus, a end loss order is placed 25 pips to a higher place the entry signal.

On the downside, we apply the horizontal back up to place a turn a profit-taking gild. Ultimately, the cost action rotates lower to bring us around 65 pips in profits.

Position Trading

Position trading is a long-term strategy. Unlike scalping and day trading, this trading strategy is primarily focused on fundamental factors.

Small market fluctuations are not considered in this strategy as they don't bear upon the broader market film.

Position traders are likely to monitor key bank monetary policies, political developments and other fundamental factors to identify cyclical trends. Successful position traders may open just a few trades over the entire year. However, profit targets in these trades are probable to be at least a couple of hundreds pips per each trade.

This trading strategy is reserved for more patient traders every bit their position may take weeks, months or even years to play out. You tin can observe the dollar alphabetize (DXY) reversing its trend management on a weekly chart below.

DXY - the dollar index weekly chart

A reversal is a result of the huge monetary stimulus provided by the Usa Federal Reserve and the Trump administration to assist the troubled economy. As a result, the amount of agile dollars increases, which decreases the value of the dollar. Position traders are probable to get-go selling the dollar on trillion-dollar stimulus packages.

Their target may depend on different factors: long-term technical indicators and the macroeconomic environment. In one case they believe that the current surly trend is nearing its end from a technical perspective, they will seek to exit the trade. In this example, we see the DXY rotating at the multi-twelvemonth highs to trade more 600 pips lower 4 months later (March - July).

Summary

Each trader needs to detect the best Forex trading strategy that suits their trading style;
Choose your ain trading strategy by finding a preferred fourth dimension frame, the desired position size and the number of trades yous are looking to open up;
Scalping is a popular trading strategy that involves opening numerous trades over a short menstruation of time to capitalize on smaller marketplace movements;
Solar day traders tend to open up and shut all trades within a unmarried 24-hour interval;
Position trading is reserved for more patient traders with a background in finance and economics equally they await to profit from long-term market trends.