The 5 Most Profitable Forex Strategies
Forex-strategy - is a carefully developed system of rules followed by a trader who wants to achieve multiplication of their money in the foreign exchange market.
Without a strategy, a trader in the market becomes absolutely helpless, having no idea where to move and what to do in this or that situation. On the contrary, having a strategy will allow a trader to enter and exit transactions with confidence, without panic and chaotic, inconsequential actions.
It is worth noting right away that choosing the right strategy - is not an easy thing to do. A strategy that suits one trader perfectly may turn out to be exceptionally uncomfortable for another. That's why the best strategy will be the one that suits you - by all parameters and characteristics.
In this article, we have tried to collect the five most profitable strategies that are suitable for beginner traders.
1. Moving averages
The moving average strategy is one of the most popular strategies among beginners. Its merits include the possibility of using it on almost any trading instrument.
Moving averages will be used for the W1 timeframe (to determine the current trend) and H4 (to enter the transaction). It is not recommended to trade on insignificant timeframes - because of the threat of false signals.
Two moving averages should be placed on the weekly chart:
- simple (period 5);
- exponential (period 21).
If the price is below the two moving averages, we see a downtrend, which means that on the 4-hour chart we will only consider selling. If the price is above the moving averages, we see an uptrend, which means that on the H4 timeframe we will only consider buying.
Having identified the current trend, we need to go to the chart H4, and build on it three simple moving averages (period 7 and 55). As you can see in the above figure, there is a downtrend, which means that we are considering only selling.
The options for entering the trade in this case are defined as follows:
- When moving averages cross from bottom to top, a pending sell order must be placed at the level of the SMA55 moving average. If the moving average is shifted, the order should be moved behind it until it triggers or the entry conditions change;
- If the moving averages cross from top to bottom, you should wait for the candle to close below the crossing point, and then enter the sale at market value.
Stop-loss is set for the closest local maximum, and take-profit is set at a distance from the entry point, equal to two or three stop-losses. Even if two losing trades happen in a row, the trader will be able to recoup his losses and make a profit on a profitable third trade. Similarly, we act when buying, only stop-losses must be set beyond the local minimum.
Strategies using moving averages on our blog:
- Trading by Moving Average Arnaud Legu
- "3 moving averages" - binary trading strategy
- "Moving Average - an effective and simple trading strategy
- Binary Options Strategy - "two Moving Averages"
- The Strategy "Sliding down the Averages"
- Moving Averages Strategy for Binary Options "Differential"
2. The "Juicer" strategy
This "beginner" strategy will also allow the trader to gain maximum profit by trading on daily timeframes on any trending currency pairs. An interesting feature of the strategy is that there is no need to use indicators - it makes working on the exchange much clearer.
The scheme of applying the "Juicer" strategy is as follows:
- The trader waits for the signal from the combination of Japanese candles (to buy, you must wait for a bearish candle, and then two bullish candles, with the body of the second bullish candle must close above the maximum of the first);
- The trader sets a pending buy order five points higher than the maximum of the second bullish candle, stop-loss is placed on its minimum, and take-profit at a distance of five hundred points from the point of entry;
- When passing the value of two hundred pips, it is better to move the trade to Breakeven, and, in addition, to activate the trailing stop in increments of fifty pips.
If you find a trade after four days in deficit, it is worth closing it on the market.
3. The "Beginning" Strategy
As you know, novice Forex conquerors prefer to be in the market almost all the time while spending a minimum of time on analytics. The "Start" strategy is perfect for such trading and will allow a trader to open a deal every day with the beginning of London SessionIt takes no more than five minutes to do the job.
The strategy is simple, and the direct trade is carried out on the timeframe M30. So, having waited for the opening of the London session, starting at 10 am Moscow time, it is necessary to wait for the formation of the first thirty-minute candle and to place two pending orders:
- one to buy a few points above the maximum;
- The second to implement is slightly below the minimum.
Stop-losses are placed on the extremes of the aforementioned candle so that the triggering of a stop-loss on one order activates the opposite pending order. The placing of take-profits is not required, you only need to close all positions at the end of the London session, regardless of their profitability or loss, and remove orders that are not triggered. It should be borne in mind that the closing of the London session and the opening of the American session often leads to a reversal of the value.
The untimely closing of positions in this case threatens a serious disadvantage.
When waiting for significant news, about thirty minutes to transfer positions to Breakeven, and keep in mind that in trading on this strategy is best to apply a pair of GBP.
4. Strategy "Sniper"
This strategy also belongs to the type of simple, accessible even for novice traders and involves trading on the breakout or rebound levels. To apply the strategy, it is necessary to find areas on the chart, from which the price has already bounced more than once, mark them with horizontal lines, because the probability of another bounce is quite high. If the price breaks through a horizontal level, it is called a level breakout.
This strategy can be traded on any currency pair, on M5 or M15 timeframes. In the case of a rebound from the level and fixation of its value, it is necessary to enter the market in the direction of the rebound. If a breakout occurs, you can wait for a pullback and enter the market at a better value or enter in the direction of the breakout.
The stop-loss is most often placed behind the level, and the take-profit in the area of the closest level. When a profit of forty points is reached, it is better not to trade on that day. It is also not recommended to trade during news releases.
5. Three Candles Strategy
The "Three Candles" strategy resembles "Juicer", but it can be applied to any timeframe, including minute and five-minute. That is, the strategy can be applied to scalping, which is so beloved by beginners, giving the possibility of constant presence in the market with sufficient income, but with the risks of greater compared to the trade on the daily charts.
The basic rules for inputs are as follows:
- The first candle is the one whose maximum or minimum clearly stands out from the other bars;
- The maximum or minimum of the second candle should be higher or lower than the previous one;
- the body of the third candle is the trader's desired income.
Entry is made after the close of the second candle, and exit - after the close of the third.
Stop-loss is placed at the opposite level of the second candle.
By the way, the size of the candles is worth paying attention to. In the case where the first candle has a small body size, you should not enter. Also, the signal should be missed when the body size of the second candle is too large. It is not worth trading thirty minutes before and thirty minutes after the release of significant news.
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Choosing a strategy: Individuality is the key to success
At the end of our review, we note that the novice trader should choose strategies based on the following factors:
- of his own psychological type;
- a realistic assessment of their level of professionalism;
- the estimated amount of time available for trading.
Correctly chosen Forex strategy can be combined with other types of strategies, and the professional growth of the trader will allow him in the future to complement the simple strategy more complex, profitable and interesting.