How To Create A Powerful Forex Trading Strategy: Ultimate Guide For New Traders

What’s up Traders, in this article, we’re going to be talking about create a Forex Trading Strategies. You may have heard that trading requires a high level of discipline. While this is true, how can you ensure that discipline is enforced when working in a trade? Having a variety of Forex trading techniques that you can stick to is one way to help.

You may be confident that you are employing a high-quality Forex trading system that works for you if your Forex trading strategy is well-reasoned and back-tested. 

This self-assurance will make it easier for you to stick to the guidelines of your Forex strategy and so keep your discipline.

I cover high forex methods in our ‘Forex Trading Strategies’ tutorial, which you can start using right away!

 

What is the mean of a Forex Trading Strategy?

 

• The Fundamentals of a Forex Trading Strategy
• Putting together a Forex Trading Strategy
• When should you change your Strategy?
• A simple Forex Trading Strategy example 

A forex trading strategy is a method that a forex trader employs to determine whether to buy or sell a currency pair at any given point in time. 

Technical analysis or fundamental, news-based events might be used to develop forex trading techniques.

The majority of a trader’s currency trading strategy consists of trading signals that prompt buy or sell choices. Trading techniques for forex can be found on the internet or developed by traders themselves.

With a daily turnover of roughly $6.6 trillion, the FX market is the largest in the world. 

The employment of specialised trading tactics to produce profits from the buying and selling of currency pairs in the forex market is known as forex trading strategies. 

In forex trading techniques, trade signals are generated using either manual or automated tools.

Traders developing their own trading systems should backtest and paper trade their techniques to ensure that they perform successfully before investing real money. 

Opening a demo account and practising with it is one way to learn how to trade forex.

 

The Fundamentals of a Forex Trading Strategy

For creating trading signals, forex trading strategies can be either manual or automated. A trader sits in front of a computer screen looking for trading signals and deciding whether to buy or sell using manual procedures.

A trader creates an algorithm that discovers trading signals and performs deals on its own in automated systems. Human emotion is removed from the equation in the latter systems, which may boost performance.

When buying off-the-shelf forex trading techniques, traders should be cautious because it is difficult to evaluate their track record, and many successful trading systems are kept hidden.

 

Putting together a Forex Trading Strategy

Many forex traders begin by using a basic trading strategy. They may note, for example, that a particular currency pair likes to bounce from a specific support or resistance level.

They may then elect to incorporate more elements to improve the accuracy of these trading signals over time. For example, they may demand that the price rebound by a certain percentage or number of pips from a specific support level.

An successful forex trading strategy consists of numerous important elements:

Choosing a market: Traders must decide which currency pairings they will trade and become specialists at reading them.

Position sizing: Traders must establish the size of each position in order to manage the amount of risk they take on each trade.

Entry points: Traders must set guidelines for when to enter a long or short position in a particular currency pair.

Exit points: Traders must design exit points that advise them when to exit a long or short position, as well as when to abandon a losing one.

Trading strategies: Traders should have a set of rules for buying and selling currency pairs, including which execution technology to use.

Traders might consider creating trading systems in tools like MetaTrader, which make rule-following easy to automate. Furthermore, these programmes allow traders to backtest trading techniques to determine how well they might have worked in the past.

 

When should you change your Strategy?

When traders follow the guidelines, a forex trading strategy performs really effectively. However, just like anything else, one method may not always be a one-size-fits-all solution, so what works today may not work tomorrow.

Traders should evaluate the following before modifying a game plan if a strategy isn’t proving profitable or providing the intended results:

Risk management should be matched to trading style: If the risk-to-reward ratio isn’t right, it may be time to switch techniques.

Market circumstances change: Because a trading strategy may be dependent on specific market trends, it may become obsolete if those trends shift. This could indicate that changes or revisions are required.

Understanding: If a trader doesn’t grasp the approach, it’s likely that it won’t succeed. The strategy’s effectiveness is lost if a problem arises or if a trader does not understand the guidelines.

While change is beneficial, changing your forex trading strategy too frequently might be costly. You may lose out if you change your strategy too frequently.

 

A simple Forex Trading Strategy example 

The majority of successful forex traders devise a trading strategy and refine it over time. Some transactions are based on a single study or computation, while others are based on broad-spectrum analysis. One simple technique is based on interest rate differentials between two countries.

Consider a trader who expects interest rates in the United States to climb faster than in Australia, despite the fact that the exchange rate between the two currencies (AUD/USD) is 0.71 (i.e., $0.71 USD buys $1.00 AUD).

Higher interest rates in the United States, according to the trader, will enhance demand for USD, lowering the AUD/USD exchange rate because it will take fewer, stronger USD to acquire a AUD.

Assume the trader is correct, and interest rates rise, causing the AUD/USD exchange rate to fall to 0.50. This means that to buy $1.00 AUD, you’ll need $0.50 USD. The investor would have gained from the shift in value if they had shorted the AUD and longed the USD.

 

On the Currency Market, where can I Trade Currencies?

As with any other market, there are a plethora of online forex brokers to select from. Look for platforms with minimal commissions and tight spreads. 

Make certain that your broker is regulated and has a good reputation. A platform featuring graphing tools and algorithmic trading is also beneficial for more skilled traders.

 

In Forex, what is a “pip”?

“Percentage in point” or “price interest point” is what Pip stands for. According to forex market convention, a pip is the smallest price change that an exchange rate can make. 

The pip change is the last (fourth) decimal point in most currency pairs that are priced to four decimal places. As a result, a pip is equal to 1/100 of a percent, or one basis point.

 

What is the simplest Forex Trade?

In forex trading, as in all other financial markets, there is no such thing as free money. 

However, from a mechanical standpoint, the simplest technique is just speculating on whether one currency will rise or fall in value relative to another. Of course, if you misjudge the bet’s direction, you could lose money.

 

In Forex, what is a carry Trade?

A currency carry trade is a popular method that involves borrowing money from a low-interest currency to support the purchase of a higher-interest currency. 

A carry trader tries to profit from the difference in interest rates between two currencies, which can be significant depending on the leverage utilised.

 

What is the mean of a Trade size in Forex?

There are numerous typical trading (lot) sizes for FX accounts, depending on your level of competence and funds. Order lots of 100,000 base units are required for conventional forex accounts; Mini accounts are standardised at 10% of that, or 10,000 lot trades.

Micro accounts, on the other hand, enable 1,000 base unit trades, while nano accounts only allow 100 (although nano accounts aren’t always available). 

This means that orders for normal accounts must be entered in multiples of 100,000, while trades for mini accounts must be entered in multiples of 10,000, and so on.

 

Fibonacci Retracement Forex Trading Strategies

 

• What are Fibonacci Retracements and How do they work?
• Traders’ Forex Strategies using Fibonacci Levels
• Trading Methodology

Fibonacci retracements are used by forex traders to determine where to place market entry, profit-taking, and stop-loss orders. In forex trading, Fibonacci levels are often utilised to identify and trade support and resistance levels. 

New support and resistance levels are frequently at or near these trend lines after a large price movement up or down.

For trades of all time frames, the Fibonacci trading method use the “golden ratio” to calculate entry and exit positions. This style of trading is divisive since it is based on ratios that may not always correspond to individual trades.

Sticking to a numerical trading technique, such as the Fibonacci strategy, can help restrict or eliminate emotional bias in trades.

 

If you are looking to find a suitable forex broker, be sure to read the following guides:

10 Best Forex Brokers That Give The Most Value To Traders

9 Best Forex Brokers That Are Recommended For Day Trading

9 Best Forex Brokers That Are Recommended For Scalping

My reviews about the best forex brokers in the world that offer the most value and facilities to traders.

Read About:

IRONFX Review                                      BLACKBULL MARKETS Review
XM Review                                               PUPRIME Review
INSTAFOREX Review                             TRADEVIEW MARKETS Review
VANTAGE Review                                   SUPERFOREX Review
INFINOX Review                                    AVATRADE Review
EIGHTCAP Review

 

What are Fibonacci Retracements and How do they work?

Fibonacci retracements are used to identify major support and resistance levels. After a market has made a strong move up or down and appears to have levelled out at a given price level, Fibonacci levels are frequently estimated.

Traders add horizontal lines across a chart at the crucial Fibonacci retracement levels of 38.2 percent, 50 percent, and 61.8 percent to highlight places where the market may retrace before resuming the broader trend set by the first huge price increase.

The 50% level isn’t part of the Fibonacci number sequence, but it’s included since traders are used to seeing markets retrace around half of a strong move before resuming and continuing their trend.

 

Traders’ Forex Strategies using Fibonacci Levels

Each trader’s plan will be unique, therefore as an investor, think about how each of the tactics listed below can fit into your entire market strategy. 

The options below aren’t used by every trader, and it’s fine if none of them fit your strategy. Fibonacci retracements are used in the following strategies:

*With a stop-loss order a bit below the 50% level, you can buy near the 38.2 percent retracement level.

*With a stop-loss order a bit below the 61.8 percent mark, you can buy near the 50% level.

*Fibonacci retracement levels can be used as profit-taking objectives when entering a sell position near the top of a major move.

*If the market retraces close to one of the Fibonacci levels and then resumes its previous move, you may use the higher Fibonacci levels of 161.8 percent and 261.8 percent to identify potential future support and resistance levels if the market moves beyond the prior high/low.

 

Trading Methodology

Almost every trader has a trading style or set of methods that they employ to maximise profit potential while controlling their emotions. 

The Fibonacci trading technique is based on factual data, and if a trader follows their approach, emotional interference should be minimal.

The aforementioned Fibonacci trading strategies can be used for both long-term and short-term transactions, ranging from minutes to years. Most deals, however, are done on a shorter time frame due to the nature of currency movements.

 

How can I make a Forex Trading Strategy with the Stochastic Oscillator?

The stochastic oscillator is a momentum indicator used extensively in forex trading to identify probable trend reversals. The closing price is compared to the trading range over a particular period to determine momentum.

The charted stochastic oscillator really consists of two lines: percent K, which represents the indicator, and percent D, which represents the three-day simple moving average (SMA) of percent K. When these two lines cross, it indicates that a trend shift is on the way.

A downward cross of the signal line in a chart with a pronounced bullish trend, for example, shows that the most recent closing price is closer to the lowest low of the look-back period than it has been in the preceding three sessions. 

A quick drop to the lower end of the trading range after continuous rising price movement could indicate that bulls are losing steam.

The stochastic oscillator, like other range-bound momentum oscillators like the relative strength index (RSI) and Williams percent R, is useful for recognising overbought and oversold conditions.

The stochastic oscillator, which has a range of 0 to 100, displays overbought conditions with readings above 80 and oversold conditions with readings under 20. 

Crossovers in these extreme ranges are thought to be extremely powerful signals. Crossover indications that do not materialise at these extremes are often overlooked by traders.

Look for a currency pair that has a pronounced and long-term bullish trend when developing a trade strategy based on the stochastic oscillator in the forex market. 

With price approaching a previous area of resistance, the ideal currency pair has already spent some time in overbought condition.

Look for dwindling volume as another sign of bullish weariness. Keep an eye out for price to follow the stochastic oscillator down through the signal line.

Wait for price to confirm the downturn before entering, even if these combined signs are a strong predictor of coming reversal. Momentum oscillators are known to throw false signals from time to time.

When you combine this setup with candlestick charting techniques, you can improve your strategy even further and get clearer entry and exit signals.

 

Using the Exponential Moving Average (EMA) in a Forex Trading Strategy

One of the most widely used forex trading tools is the exponential moving average (EMA). Traders use the EMA overlay on their trading charts to establish trade entry and exit points based on where price movement falls on the EMA. 

If it is high, the trader may contemplate a sale or short sale; if it is low, the trader may consider a buy.

One of the most popular trading indicators, the exponential moving average (EMA), can be a beneficial forex trading tool when assessing entry and exit locations. Other trading techniques, such as MACD, RSI, and others, should be utilised in conjunction with the EMA.

When traders come across long-term EMA crossing points, they will typically come into some type of resistance or support, as well as a large rise in volume.

The EMA differs from a simple moving average (SMA) in two ways: the most recent data is given greater weight, and the EMA reacts to recent price movements faster than the SMA.

The exponential moving average (EMA) is quite popular in forex trading, and it is frequently used as the foundation of a trading strategy. 

Selecting a shorter-term EMA and a longer-term EMA, and then trading based on the position of the short-term EMA in respect to the long-term EMA, is a frequent forex trading technique that uses EMAs.

When the short-term EMA crosses above the long-term EMA, a trader would enter a buy order, and when the short-term EMA crosses below the long-term EMA, a trader would enter a sell order.

When we talk about EMA figures like 20 EMA or 10 EMA, we’re talking about the previous time period that the trader chose. This number is usually expressed in days, so a 20 EMA equals the average of the previous 20 days, a 50 EMA equals the last 50, and so on.

 

As a Buy/Sell Indicator, EMA Crossovers are used

A trader could use crosses of the 50 EMA by the 10 or 20 EMA as trading indications when developing a strategy. Another approach employed by forex traders is the use of a single exponential moving average (EMA) in relation to price to influence their trading selections.

The trader continues on the buy side as long as the price remains above the chosen EMA level; if the price falls below the chosen EMA level, the trader becomes a seller unless the price crosses to the upside of the EMA.

The EMAs 5, 10, 12, 20, 26, 50, 100, and 200 are the most often utilised by forex traders. Shorter-term EMAs, such as the 5 and 10, are more likely to be used by traders working with shorter timeframe charts, such as the five- or 15-minute charts. 

Greater EMAs, such as the 20 and 50, are commonly used by traders looking at higher timeframes. For longer-term trend trading, the 50, 100, and 200 EMAs are extremely important.

Although past performance does not guarantee future results, traders can use the EMA to assess if a specific point in time—regardless of their designated timeframe—is an outlier when compared to the timeframe’s average.

 

How can I construct a Forex Trading Strategy using the Relative Vigor Index (RVI)?

The Relative Vigor Index (RVI) can be combined with other technical indicators to develop a forex trading strategy that maximises earnings from a long-term rally. The RVI calculates the strength of price movement up or down by comparing the closing price to the price range.

Higher RVI numbers suggest a strengthening of the trend, whereas lower levels imply a weakening of momentum. The RVI’s slope often changes direction ahead of price as a momentum indicator.

Price moves back and forth in a long-term uptrend as it progresses in the direction of the broader trend. 

Instead of utilising a buy-and-hold trend trading technique, the RVI can be used by a trader who wishes to optimise earnings by moving in and out of purchase positions in accordance with trend peaks and retracements.

Other technical indicators are utilised to confirm the RVI’s trading signals. The following is the strategy:

*Once the trader has taken a long position in an overall uptrend, the RVI will be watched for bearish divergence from price, which occurs when the price sets a new high but the RVI does not.

*Another technical indicator, the relative strength index, is used to confirm an oncoming pullback (RSI). 

If the RSI indicates overbought circumstances in the market with readings above 70, the RVI divergence indicator is considered confirmed. Half of the existing purchase position is profited on by the trader.

*When the RVI shows a positive divergence from price and the RSI suggests oversold circumstances, the trader looks to re-establish the whole long position, assuming a retracement occurs.

*While the overall uptrend remains intact, as shown by the price holding above the 100-period moving average, the trader continues to take half profits before resuming a full long position (MA). The trader closes out the entire position if the price falls below the 100 MA.

How to Trade Forex using an Arbitrage Strategy?

 

• Example of Arbitrage Currency Trading 
• Calculator for Forex Arbitrage

Forex arbitrage is a risk-free trading approach that allows retail forex traders to earn without exposing themselves to open currency markets. The technique entails seizing opportunities given by pricing inefficiencies while they are still available.

Arbitrage trading entails buying and selling different currency pairings to take advantage of pricing inefficiencies. The following example will help us better grasp how this method works.

 

Example of Arbitrage Currency Trading 

The EUR/USD, EUR/GBP, and GBP/USD exchange rates are currently 1.1837, 0.7231, and 1.6388, respectively. A forex trader might buy one mini-lot of EUR for USD 11,837 in this situation. After then, the trader may sell the 10,000 Euros for 7,231 British pounds.

Long bets cancel short positions in each currency, thus the 7,231 GBP could be sold for USD 11,850 for a profit of $13 per trade, with no open exposure. The same trade with 100,000 normal lots (rather than mini-lots) would result in a profit of $130.

With arbitrage methods, the act of exploiting pricing inefficiencies will rectify the problem, therefore traders must be ready to act swiftly. As a result, some offers are only available for a limited time.

Currency arbitrage trading necessitates the availability of real-time pricing quotes as well as the ability to react quickly to opportunities. Forex arbitrage calculators can help with this process of identifying chances in a short period of time.

 

Calculator for Forex Arbitrage

There are numerous methods available to assist in the discovery of pricing inefficiencies, which might be time-consuming otherwise. One of these tools is the forex arbitrage calculator, which gives real-time currency arbitrage chances to retail forex traders.

Third-party vendors and forex brokers sell forex arbitrage calculators. Because all software packages and platforms used in retail forex trading are not the same, it is critical to try out a demo account first. 

It’s also a good idea to try out a few different calculators before settling on one to find the ideal one for your trading approach. See “Getting Started in Forex” for more information on the principles of forex trading.

 

Forex Trading Strategies of various types

 

• Forex 50-Pip a day Strategy
• Forex Trading Strategy on the daily Chart
• One-Hour Trading Strategy for Forex
• Weekly Forex Trading Strategy
• Price Action Trading’s importance in Forex Strategies
• Forex Trend-Following Strategies
• Forex Trading Strategy for 4 Hours
• Forex Strategies that go against the Trend

Below is a list of trading strategies that are considered to be among the best Forex trading strategies available, as well as how to trade them, so you may try to pick the one that is appropriate for you.

 

Forex 50-Pip a day Strategy

The 50-pips-a-day Forex technique, which takes advantage of the early market movement of certain highly liquid currency pairings, is one of the most recent Forex trading strategies to be deployed. The GBPUSD and EURUSD currency pairs are two of the best currency pairs to trade with this method.

Traders place two positions or two opposite pending orders after the 7 a.m. GMT candlestick closes. The other position is immediately cancelled when one of them is activated by price fluctuations.

After the development of the 7am GMT candlestick, the profit goal is set at 50 pips, and the stop-loss order is put anywhere between 5 and 10 pips above or below it. This is done in order to reduce risk. After these conditions have been established, the market will take care of the rest.

Short-term Forex trading tactics include day trading and scalping. However, keep in mind that shorter-term trading has a higher risk due to the increased number of trades executed, therefore proper risk management is critical.

The EURUSD H1 chart from the Zero.MT4 account is shown below in a snapshot from Admirals’ MetaTrader 4 trading platform:

The 7 a.m. bar is shown in orange boxes. The next bar did not always trade beyond the previous bar’s high or low, resulting in no trading setup unless the trader kept their orders in the market.

The 50 pips a day Forex strategy’s usefulness has not been proven over time, and it just serves as a foundation of ideas for you to build upon. Past results are not a good predictor of future outcomes.

 

Forex Trading Strategy on the daily Chart

Daily charts are preferred by the top Forex traders over more short-term techniques. A Forex daily chart trading strategy has less market noise than a Forex 1-hour trading strategy or even those with smaller time frames.

Due to their lengthier duration, such Forex trade setups have the potential to give you over 100 pips every day, making them some of the best Forex trade setups and perhaps some of the most lucrative trading strategies available.

Although there are no guarantees in trading, daily Forex strategy indications can be more dependable than lower timeframe signals, and the possibility for profit can also be higher. 

Traders also don’t have to be concerned about breaking news or price variations on a daily basis. The three basic ideas that underpin the Forex daily strategy are:

Identifying the pattern: Markets cycle back and forth between trending and consolidating. The first rule of the Forex daily strategy is to look for long-term moves in the currency market.

Examining price data from the previous three months is one approach to spot a Forex trend trading chart. The next stage will be to determine the swing highs and lows. You can determine the market direction by reviewing this pricing data on the current charts.

Staying focused: This will take time, and you’ll need to resist the impulse to jump into the market right now. The key to success in a daily time frame Forex strategy is to remain out and save your funds for a greater chance.

Using bigger stop losses: Be wary of the market’s huge intraday fluctuations. Using larger stops, on the other hand, does not imply risking a large amount of money, but it does assist in dealing with the unpredictable volatility that can occur throughout the day, which is why it is included in the list of trading methods.

While there are numerous trading strategy manuals for skilled FX traders, the greatest Forex strategy for consistent earnings and developing the most successful trading methods can only be attained via considerable practise. 

Let’s keep going down the list of trading methods and look at another one of the greatest.

 

One-Hour Trading Strategy for Forex

 

• Buy Trade Regulations
• Sell Trade Regulations

In this Forex technique, you can take advantage of the 60-minute time frame. The EUR/USD, USD/JPY, GBP/USD, and AUD/USD are the best currency pairings to trade using this Forex approach.

The MACD is the most suited Forex trading strategies resource for this type of approach, and it is available on both MetaTrader 4 and MetaTrader 5.

 

Buy Trade Regulations

When the MACD histogram crosses the zero line, you can enter a long trade. A recent swing low could be used as a stop loss.

 

Sell Trade Regulations

When the MACD histogram falls below the zero line, you can enter a short trade. A recent swing high could be used as a stop loss.

An hourly chart of the AUD/USD is shown below. The red lines depict cases in which the MACD histogram has crossed over and under the zero line:

 

Weekly Forex Trading Strategy

While many Forex traders favour intraday trading methods because market volatility offers more possibilities in shorter time frames, a Forex weekly trading plan offers more flexibility and steadiness.

A weekly candlestick chart gives a wealth of market data. Weekly Forex trading techniques are built on taking smaller positions and avoiding taking on too much risk.

Traders can use the most typical price action trading patterns for this approach, such as engulfing candles, haramis, and hammers. The hammer, which appears like the graphic below, is one of the most often used patterns in Forex trading:

The shooting star, which appears like the image below, is the hammer’s polar opposite:

The chart below depicts the weekly price activity of the New Zealand dollar against the US dollar, as well as examples of the patterns discussed above.

 

Price Action Trading’s importance in Forex Strategies

The amount to which fundamentals are used differs per trader. At the same time, price action will always be a part of the greatest Forex strategy. Technical analysis is another name for this.

There are two basic types of technical currency trading strategies: trend tracking and countertrend trading. Both of these FX trading methods aim to profit from price patterns by recognising and utilising them.

Support and resistance are two of the most essential ideas in price patterns. Simply put, these phrases refer to a market’s tendency to recover from past lows and highs.

*The tendency of the market to climb from a previously established bottom is known as support.

*The market’s tendency to fall from a previously achieved high is known as resistance.

This happens when market participants compare future prices to recent highs and lows.

*What happens if the market falls to new lows? Simply put, purchasers will be drawn to what they perceive to be low-cost.

*When the market reaches recent highs, what happens? Sellers will be drawn to what they perceive to be excessively high prices, while purchasers will seek to lock in a profit.

As a result, the yardsticks used to judge current prices are recent highs and lows. Support and resistance levels have a self-fulfilling quality to them.

This occurs because market participants expect particular price activity at certain locations and react appropriately. As a result, their activities may influence the market to behave as expected.

These three points, however, are worth noting:

*Support and resistance levels are not set in stone; rather, they are a common result of market participants’ natural behaviour.

*The goal of trend-following systems is to profit from the breakdown of support and resistance levels.

*Counter-trending trading is the polar opposite of trend following, aiming to sell when a new high is made and purchase when a new low is made.

 

Forex Trend-Following Strategies

A market may break out of a range by going below or above the support or resistance to begin a trend. What causes this to happen? When support breaks down and a market drops to new lows, buyers become hesitant to buy.

This is due to purchasers’ persistent observation of lower prices being created and their desire to wait for a bottom to be reached. 

Simultaneously, traders will be panic selling or being driven out of positions, or establishing short positions because they feel the market can go lower.

When it is confirmed that prices will not fall any further, the pattern continues until the selling is depleted and purchasers’ confidence begins to return. 

Traders who use trend-following methods are encouraged to purchase when the market breaks through resistance and sell when it breaks through support.

Furthermore, trends can be both striking and long-lasting. This type of method has the potential to be the most profitable Forex trading technique due to the size of the moves involved.

Trend-following systems rely on indicators to tell traders when a new trend has started, but there’s no way to know for sure.

The good news is that if the indicator can identify a moment when there’s a better likelihood that a trend has started, you’re putting yourself in a better position to apply the finest Forex trading system.

A breakout is a signal that a trend is about to build. A breakout occurs when the price moves for a specific number of days above or below the highest high or lowest low.

Consider the following scenario…. A 20-day breakout to the upside occurs when the price rises above the previous 20-day high. Because of the long timeframe – during which earnings can vanish as the market swings – trend-following techniques necessitate a specific attitude.

These kind of trades can be more mentally taxing. When markets are volatile, patterns are more difficult to spot, and price fluctuations are bigger. As a result, for tranquil and trending Forex markets, a trend-following technique is the optimal trading approach.

A Donchian Trend system is a superb example of a simple trend-following strategy. Richard Donchian, a futures trader, devised Donchian channels, which serve as a predictor of emerging trends.

The Donchian channel characteristics can be adjusted as needed, but we’ll use a 20-day breakout for this example.

One of two things can be inferred from a Donchian channel breakout:

• If a market’s price rises beyond its 20-day high, it’s time to buy.
• If the price falls below the 20-day low, it’s time to sell.

The Admiral Donchian indicator is set to 20 bars on a daily chart of EUR/JPY.

The Admirals Supreme Edition bundle includes the Donchian Channel indicator for free. Admiral Donchian is the name of the character. 

When the market is more favourable to the Forex trading system, there is an additional guideline for trading. This rule is intended to eliminate breakouts that are contrary to the long-term trend.

In a nutshell, you look at the 25-day and 300-day moving averages (MAs). The allowable direction is determined by the direction of the shorter moving average. According to this regulation, you can only go:

• If the 25-day moving average is lower than the 300-day moving average, the trade will be short.
• If the 25-day moving average is higher than the 300-day moving average, the position is long.

Trades are exited in the same way they were entered, but with only a 10-day breakout. This indicates that if you start a long position and the market falls below the previous 10-day low, you should sell to exit the trade, and vice versa. 

Now, let’s take a look at another system that could be the most effective trading plan for you.

 

If you are looking to find a suitable forex broker, be sure to read the following guides:

10 Best Forex Brokers That Give The Most Value To Traders

9 Best Forex Brokers That Are Recommended For Day Trading

9 Best Forex Brokers That Are Recommended For Scalping

My reviews about the best forex brokers in the world that offer the most value and facilities to traders.

Read About:

IRONFX Review                                      BLACKBULL MARKETS Review
XM Review                                               PUPRIME Review
INSTAFOREX Review                             TRADEVIEW MARKETS Review
VANTAGE Review                                   SUPERFOREX Review
INFINOX Review                                    AVATRADE Review
EIGHTCAP Review

 

Forex Trading Strategy for 4 Hours

The 4-hour trend following approach, which can also be utilised as a swing trading strategy, is one potentially advantageous and profitable Forex trading strategy.

This approach screens for probable trade signal locations using a 4-hour base chart. To decide where the real positions will be taken, the 1-hour chart is used as the signal chart.

Always keep in mind that the signal chart’s time period should be at least one hour lower than the base chart’s. For the best results, two sets of moving average lines are used in this Forex technique.

The 34-period MA will be one, and the 55-period MA will be the other. The MA lines must correspond to the price action to determine whether a trend is worth trading.

The following requirements must be met in the event of an uptrend:

• The price is moving over the MA lines.
• The 34-MA is higher than the 55-MA.
• The MA lines are upward sloping.

In the event of a decline, the following conditions must be met:

• The price is trading below the MA lines.
• The 34-MA is lower than the 55-MA.
• The MA lines have a downward slant to them.

During uptrends, the MA lines will act as a support zone, and during downtrends, they will act as resistance zones. The finest positions for the trend trading method can be found within and around this zone.

The 34-exponential moving average (purple line) and the 55-exponential moving average (red line) are shown on a daily chart of GBP/USD:

Forex Strategies that go against the Trend

Most breakouts do not turn into long-term trends, therefore counter-trend techniques rely on this fact. As a result, a trader employing such a strategy aims to profit from prices’ proclivity to bounce off previously established highs and lows.

On paper, counter-trend tactics have a high success record, making them one of the greatest Forex trading strategies for boosting confidence.

It’s vital to emphasise, however, that on the risk management side, tighter controls are required. Support and resistance levels must hold in order for these Forex trading tactics to work. 

However, if these levels are breached, there is a significant risk of big losses.

It’s a good idea to keep an eye on the market at all times. This type of strategy works best in a market that is both stable and volatile. 

This market environment allows for reasonable price movements that are limited to a certain range. It’s crucial to remember that the market can change its mind.

A steady and calm market, for example, could start to trend while being stable, then become turbulent as the trend progresses. It’s difficult to predict how the situation of a market will alter.

You should seek evidence of the current situation to determine whether it suits your trading style or not, and it should be one of the Forex methods you employ.

 

Finding the best Forex Trading Strategy for you

Over time, several different forms of technical indicators have been produced. As we’ve seen in these trading strategy guides, the huge strides forward in internet trading technologies have made it much easier for individuals to build their own indicators and systems.

More information on technical indicators can be found in education area (My Blog). 

Simple, well-established tactics that have worked for a large number of experienced Forex traders are the greatest Forex trading strategies for beginners.

Many newbies to Forex trading may naturally wonder, “Can you make money trading Forex?” or: What is the most successful Forex strategy?

It’s critical to recognise that trading is about making money or losing money, and that there is always a risk involved. In rare situations, you may lose more money on a deal than you put in.

There are no simple Forex trading tactics that will make you rich overnight, so don’t trust any misleading headlines that claim otherwise. Forex trading is not a get-rich-quick programme.

However, you may learn about the Forex market and yourself through trial and error and using a demo trading account to find a good style. It can also assist you in gaining a better understanding of the dangers associated with trading before moving to a live account.

 

Final words

Okay, so that’s it I’ve come to the end of this presentation, I hope you’ve enjoyed it and if you really do please write a comment and click the share buttons smash it right, and click to subscribe bell to Allow notifications be updated.

Whenever, I publish content like, this and finally any questions or feedback let me know below and I’ll do my best to help, so with this guide, I hope you got value out of this presentation, I wish you good luck and good trading and I’ll talk to you soon you.

 

Read About More Strategies:

Day Trading Strategy For Pivot Points Traders (Forex Trading System For Beginners)

Bollinger Bands Forex Trading Strategy (Forex Day Trading)

Day Trading Price Action (How To Read Momentum On Forex & Stock Market)

ADX DMI Day Trading Strategy (How To Use The ADX Indicator)

Ichimoku Day Trading Strategy (Cloud Trading Explained For Beginners)

My Best Trend Following Strategy (Forex & Stock Trading System)

Forex Trading Indicators To Spot Trends (How To Identify & Follow The Trend)

How To Win The Game Of Trading (6 Lessons Learned After 10 Years Of Trial And Error)

How To Use StochRSI In Forex & Stock Trading (Stochastic RSI Trading Strategy)

Forex Trading Breakout Strategy (So Simple Yet So Powerful)

10 Trading Mistakes To Avoid On Forex & Stock Market (That Are Stopping You To Make Money)

Best Forex CCI Trading Strategy (Commodity Channel Index Explained For Beginners)

Best Moving Averages That Will Make You Tons Of Cash (For Day Trading Forex & Stocks)

Position Trading Strategies (Long-Term Forex and CFD Stock Trading)

Best Scalping Indicators for Forex and CFD Stock Trading

Best Scalping Trading Strategy For Beginners (How To Scalp Forex & Stock Market)

About Author