5 Best Forex Strategies
Forex strategy is a carefully developed system of rules observed by a trader who wants to grow capital in the foreign exchange market.
Without a strategy the trader becomes absolutely helpless in the market, with no idea where to go and what to do in a situation. The presence of a strategy, on the contrary, will allow the trader to enter and exit trades with confidence, without panic and chaotic actions unresponsive to logic.
Immediately it is worth noting that the choice of a suitable strategy is not easy. A strategy that is perfectly suitable for one trader may be extremely inconvenient for another. Therefore, the best strategy will be the one suitable in all parameters and characteristics.
In this article we have tried to collect the 5 best strategies suitable for beginning traders.
1. Moving Average
Moving Average strategy is one of the most popular strategies for beginners. Its advantages include the ability to use almost any trading tools.
Moving average will be applicable for W1 (to determine the current trend) and H4 (to come into deal) timeframes. It is not recommended to trade on insignificant time frames because of the threat of false signals.
2 moving averages shall be placed on the weekly chart:
- simple (period 5);
- exponential (period 21).
If the price position is below two moving averages, we are seeing a downward trend. This means that exclusively sales are considered at the four-hour chart. If the price is above the moving averages, we see an upward trend, which means that on the H4 timeframe only the purchases are considered.
Finding out the current trend you need to go to the H4 chart and construct 3 simple moving averages (period 7 and 55). As is seen in the figure above, there is a downtrend, so we consider sales only.
Options for coming into a deal are determined as following:
- when crossing moving averages from the bottom up, you need to place a pending order for sale at the level of the SMA55 moving average. If the moving average shifts, the order should be rearranged until it is triggered or the entry conditions are changed;
- if the moving averages cross top down, you need to wait for the candlestick to close below the cross point, then enter the trading with selling value.
Stop-loss is placed below the closest local maximum, and take-profit is placed at a distance from the entry point, equal to two or three stop-losses. Even if two losing trades occurred together, the trader can recover the loss and make a profit by profitably closing the third transaction. Similarly, when we buy, only stop-losses should be set below the local minimum.
Strategies with the application of Moving Average in our blog:
- The «Different» Strategy of Moving Averages
- Two Moving Averages
- The «Cradle» System for Trading Options
- The «Welbeck» Operating Strategy for Options
- A Professional Options Trading System Called «Handicap»
2. «Juicer» strategy
This strategy for beginners will also allow the trader to get maximum income by trading on daily timeframes with any trend currency pairs. An interesting feature of this strategy is the lack of need to use indicators – this makes the work on the stock exchange much clearer.
The use pattern of the «Juicer» strategy is as follows:
- Trader waits for the signal forming from the combination of Japanese candlesticksticks (in order to buy, you need to wait for a bearish candlestickstick, then for two bullish ones, while the body of the second bullish candlestickstick shall close above the maximum of the first one);
- Trader sets a pending order to acquire five points higher than the maximum of the second bullish candlestickstick, the stop-loss is placed at its minimum, and the take-profit is at a distance of five hundred points from the entry point;
- When passing the cost of two hundred points, it is better to move the transaction in the black, and in addition to activate the trailing-stop with a step of fifty points.
In the case of fixation of the transaction in the red after four days, the deal is supposed to be closed in the market.
3. «Start» strategy
Beginning Forex conquerors prefer to be in the market almost constantly, while spending a minimum of time on analytics. «Start» strategy is perfect for the implementation of such trading and will let the trader open a transaction every day by beginning of with the London session, spending five minutes at most at work.
The strategy is simple, and direct trading is carried out on the M30 timeframe. So, waiting for the London session to be opened, starting at 10 AM Moscow time, you need to wait for the first thirty-minute candlestickstick formation and set two pending orders:
- One to purchase – a few points above the maximum;
- Second to sell – slightly below the minimum.
Stop-losses are placed on the extreme of the mentioned candlestick in such a way that triggering a stop-loss on one order activates the opposite pending order. Take-profits are not required; you only need to close all positions at the end of the London session, regardless of their profitability or unprofitability, and remove orders that do not trigger. It should be considered that the closure of the London session and the opening of the US session often entail reversals in value.
Late closing may cause a severe minus in this case.
Waiting for significant news, you need to move positions into the black in about thirty minutes and take into account that pairs with GBP are best used in trading under this strategy.
4. «Sharshooter» strategy
This strategy also refers to the simple methods of trade, easy even for beginning traders, and involves trading on level breakout or rebound. To apply the strategy, you need to find, on the chart, zones for which the cost has already bounced more than once and mark them with horizontal lines as the chance of another rebound is high enough. If the cost breaks through the horizontal level, there will be a so-called breakdown of the level – this means that price loses its force.
Trading under this strategy is performed on any pairs of currencies, M5 or M15 timeframes. In the case of the rebound from levels and the consolidation of rebound’s value, you need to enter in the market in the direction of the rebound. If a breakout occurs, you can wait for a pullback and enter the market at the best price or in the direction of the breakout.
Stop-loss is most often placed below the level, and take-profit is placed in the area closest to the level. When you reach the profit of forty points, it is not recommended to trade this day. It is also not recommended to trade during the news release.
5. «3 candlesticks» strategy
«3 candlesticks» strategy resembles a «Juicer» strategy, but it can be used for any timeframe including one-minute and five-minute timeframes. This is the strategy that can be applied to scalping, so-loved by newcomers, which creates the opportunity of a permanent presence in the market with sufficient income gain, but with greater risks compared to trading on daily charts.
The basic rules for entry are as follows:
- the first candlestick is the one whose size, whether large or small, stands out clearly against the background of the other candles;
- the maximum or minimum of the second candlestick shall exceed or be below the previous one;
- the body of the third candlestick is the income the trader is trying to obtain.
The entry occurs after the second candlestick closes, and the quit – after the closing of the third one.
Stop-loss is placed at the opposite level of the second candlestick.
Do note that it’s certainly worth paying attention to the size of the candlesticks. If the first candlestick has a small body size, there is no point in conducting the transaction. Let the signal pass also if the body of the second candlestick is too large. There is no point in trading thirty minutes before and thirty minutes after the release of significant news.
Choosing a broker – Easy Markets
Choosing a strategy: individuality is a key success factor
At the end of our review, we would like to note that the beginning trader shall choose strategies based on the following factors:
- his own psychological type;
- real assessment of his own occupational attainment; and
- estimated amount of time available for trading.
A correctly chosen Forex strategy can be combined with other types of strategies; in addition, the trader’s professional growth will allow him to combine a simple strategy with more complex, profitable and interesting ones.