Best Forex Trading Strategy Proven Profits

The meridian 5 forex trading strategies are:

• Tendency following
• Scalping
• Swing Trading
• Price activity
• Position trading

While all of these have their strengths and weaknesses, their usability depends on the trader’s noesis, experience, and personality.

Although trading forex blindly might produce surprising results, inevitably, it will finish upwards in a disaster. It is similar going on an countless road trip without a map – initially, you might end upwards in some exciting places, simply eventually, you will exist lost.

Thus, using a forex trading strategy ends up being a necessity. Hither are some of the most popular ones that survived the test of time. Permit’south go a good overview on each one of them.

Tendency following

An former trader’s proverb says, “The tendency is your friend.” Apparently, trading in the direction of the overall marketplace is favorable, but the primary problem is detecting the tendency early enough.

The forex market tends to range before bursting out in a trend. Trend following strategies ofttimes use moving averages (MAs) as a bespeak.

For example, when the l-day uncomplicated moving average, which indicates the medium trend, crosses over the 200-day moving boilerplate (long trend), this signals the bearish market place. Yet, past the fourth dimension the trend becomes apparent, it is mainly exhausted.

Thus, the trend following in 2022 has to exist adjusted.

One of the methods we’d recommend is to find positions where you tin be a short-term contrarian only a long-term tendency follower. This includes a multi-timeframe analysis where you lot’d compare relatable charts. A practiced example would be 5-minute and ane-hr charts, or xv-minute and 4-hours. This way, you’d be equally close equally beingness incorrect in the short-term while riding off the long-term power of the tendency, giving you a favorable gamble-to-advantage ratio.

Scalping

A strategy that is non for “the faint of centre”, scalping is a very dynamic game. Traders who prefer it thrive in a quick-paced environment, frequently getting in and out of a dozen trades in a single session.

Scalping unremarkably revolves around price patterns or indicators. Information technology uses brusk-term charts: 5 -minute, 1-infinitesimal, or even tick charts.

Another tool in the forex scalper’due south arsenal are central levels. Marking the weekly open, daily open, Asian session highs or lows, and pivot points will help to decide either stop-loss or take profit levels.

All the same, the most important affair for scalping is hardware, software and net connection reliability. Speed and execution are of utmost importance, thus information technology is necessary to possess a fast computer and a broker that offers tight spreads and minimum slippage.

Swing Trading

Swing trading, sometimes referred to as momentum trading, is a blazon of trading that tries to capture a wider range of marketplace moves. Thus, swing traders will trade in the management of the trend simply also against it – sometimes holding opposing trades simultaneously.

Swing traders also readily concord their trades overnight so they take to be ready for the higher cost of trading, lower leverage, and thus likely the higher initial rest to produce meaningful returns.

At that place are different tools for swing trading, but it is hard to find a meliorate concept other than Elliott Moving ridge Theory (EWT).

Made popular by Ralph Nelson Elliot, EWT observes the market’s movement in v main waves plus 3 corrective waves.

Furthermore, 5 principal waves consist of 3 impulse waves and 2 cosmetic waves with uncomplicated rules:

• Wave 2 cannot retrace more than 100% of  wave 1
• Wave 3 cannot be the shortest of the impulse waves (i,3,5)
• Wave iv cannot get beyond wave 3 at whatever time

Elliot Wave principles are handy for swing traders because they can map the approximate market movement and trade in both directions – either for hedging or for profits. For farther information, you lot can check out the book Elliott Wave Principle Applied to the Foreign Commutation Markets by Robert Balan which has been released into public domain.

Price action

Price action refers to post-obit and anticipating the price’s move over time. Price action is a purist’s strategy as the price offers all the data we use. Everything else (indicators) is derived from the price.

Price action traders oft prefer naked charts so draw all the necessary data by hand. Candlestick patterns are often in the toolbox of price action traders as they accept been well-researched in books like “Encyclopedia of Candlestick Charts” past Thomas Bulkowski.

The major weakness of price action is that it is highly subjective. 2 traders can often come to a different conclusion by observing the same chart, even so the beauty of price activity lies in its ability to go a cocky-fulfilling prophecy due to all traders falling victim to what they believe to be key support and resistance levels.

Position trading

A long-term strategy that focuses on fundamental assay. Withal, position traders do sometimes use technical analysis – mainly for finding improve entry or exit spots.

There are 2 main drawbacks of position trading. Beginning, information technology requires patience and meaningful capital. Every bit position traders hold trades for a long time, this can incur rollover costs as well every bit opportunity costs. Furthermore, position traders tin can get through prolonged drawdowns before their assay finally catches up with the market. As the sometime Wall Street proverb says: “Markets can remain irrational longer than you can stay solvent.” Thus, you have to use trade sizing that is large enough to produce meaningful returns, but non big plenty to crash your account.

Decision

While the ways to merchandise markets are almost space, the ones we covered above are some of the nigh-researched strategies that stood the exam of fourth dimension. Although all of them tin be profitable, each has its ain strengths and weaknesses.

In the end, choosing the best one for you lot volition depend on your broker, business relationship size – but well-nigh chiefly on your personality.

Featured Depression Spreads Forex Brokers

Frequently Asked Questions

Is there a 100% winning strategy in forex?

No. There is no such matter as a 100% winning strategy. In the forex market place, anything can happen at any fourth dimension. Hazard tin can never be completely avoided, but you can manage it by taking the necessary precautions.

What is the best forex trading strategy?

Swing trading is often regarded as the best strategy in terms of time vs. result because the trader doesn’t have to spend a lot of time on the charts. However, trading strategies are highly subjective, and your favorite volition exist one that suits your personality.