Best Forex trading strategies that work.
You may have heard that maintaining your discipline is a key aspect of trading. While this is true, how can you ensure you enforce that discipline when you are in a trade?
One way to help is to have a trading strategy that you can stick to.
If it is well-reasoned and backtested, you can be confident that you are using one of the successful Forex trading strategies. That confidence will make it easier to follow the rules of your strategy—therefore, to maintain your discipline.
A lot of the time when people talk about Forex strategies, they are talking about a specific trading method that is usually just one facet of a complete trading plan. A consistent Forex trading strategy provides advantageous entry signals, but it is also vital to consider:
Picking the best Forex strategy for you.
When it comes to what the best Forex trading strategy is, there really is no one single answer.
The best FX strategies will be suited to the individual. This means you need to consider your personality and work out the best Forex strategy to suit you.
What may work very nicely for someone else may be a disaster for you. Conversely, a strategy that has been discounted by others, may turn out to be right for you.
Therefore, experimentation may be required to discover the Forex trading strategies that work . Vice versa, it can remove those that don't work for you.
One of the key aspects to consider is a timeframe of your trading style.
The following are some trading styles, from short time-frames to long, which have been widely used during previous years and still remain to be a popular choice from the list of best Forex trading strategies in 2017.
Scalping . These are very short-lived trades, possibly held just for just a few minutes. A scalper seeks to quickly beat the bid/offer spread and skim just a few points of profit before closing. Typically uses tick charts, such as the ones that can be found in MetaTrader 4 Supreme Edition.
Day trading . These are trades that are exited before the end of the day, as the name suggests. This removes the chance of being adversely affected by large moves overnight. Trades may last only a few hours and price bars on charts might typically be set to one or two minutes.
Swing trading . Positions held for several days, looking to profit from short-term price patterns. A swing trader might typically look at with bars showing every half hour or hour.
Positional trading . Long-term trend following, seeking to maximise profit from major shifts in prices. A long-term trader would typically look at the end of day charts.
The role of price action in Forex strategies.
To what extent fundamentals are used varies from trader to trader. At the same time, the best FX strategies invariably utilise price action.
This is also known as technical analysis.
When it comes to technical currency trading strategies, there are two main styles: trend following, and counter-trend trading. Both of these FX trading strategies try to profit by recognising and exploiting price patterns.
When it comes to price patterns, the most important concepts are those of support and resistance.
Put simply, these terms represent the tendency of a market to bounce back from previous lows and highs. Support is the market's tendency to rise from a previously established low. Resistance is the market's tendency to fall from a previously established high.
This occurs because market participants tend to judge subsequent prices against recent highs and lows.
What happens when the market goes near recent lows? Put it simply, buyers will be attracted to what they see as cheap.
What happens when the market goes near recent highs? Sellers will be attracted to what they see as either expensive, or a good place to lock in a profit.
Thus recent highs and lows are the yardstick by which current prices are evaluated .
There is also a self-fulfilling aspect to support and resistance levels. This happens because market participants anticipate certain price action at these points and act accordingly.
As a result, their actions can contribute to the market behaving as they expected.
However, it's worth noting three things:
support and resistance are not iron-clad rules, they are simply a common consequence of the natural behaviour of market participants trend-following systems look to profit from those times when support and resistance levels break down counter-trending styles of trading are the opposite of trend following—they look to sell when there's a new high and buy when there's a new low.
Trend-following Forex strategies.
Sometimes a market breaks out of a range, moving below support or above resistance to start a trend. How does this happen?
When support breaks down and a market moves to new lows, buyers begin to hold off. This is because buyers are constantly seeing cheaper prices being established and want to wait for a bottom to be reached.
At the same time, there will be traders who are selling in panic or simply being forced out of their positions. The trend continues until the selling is depleted and belief starts to return to buyers that the prices will not decline further.
Trend-following strategies buy markets once they have broken through resistance and sell markets once they have fallen through support levels. Trends can be dramatic and prolonged , too.
Because of the magnitude of moves involved, this type of system has the potential to be the most successful Forex trading strategy. Trend-following systems use indicators to tell when a new trend may have begun but there's no surefire way to know of course.
Here's the good news.
If the indicator can distinguish a time when there's an improved chance that a trend has begun, you are tilting the odds in your favour. The indication that a trend might be forming is called a breakout .
A breakout is when the price moves beyond the highest high or lowest low for a specified number of days. For example, a 20-day breakout to the upside is when the price goes above the highest high of the last 20 days.
Trend-following systems require a particular mindset. Because of the long duration—during which time profits can disappear as the market swings—these trades can be more psychologically demanding.
When markets are volatile, trends will tend to be more disguised and price swings will be greater. This means a trend-following system is the best trading strategy for Forex markets that are quiet and trending.
An example of a simple trend-following strategy is a Donchian Trend system.
Donchian channels were invented by futures trader Richard Donchian and are indicators of trends being established. The Donchian channel parameters can be tweaked as you see fit, but for this example we will look at a 20-day breakout.
Basically, a Donchian channel breakout suggests either of two things:
buying if the price of a market goes above the high of the prior 20 days selling if the price goes below the low of the prior 20 days.
There is an additional rule for trading when the market state is more favourable to the system. This rule is designed to filter out breakouts that go against the long-term trend.
In short, you look at the 25-day moving average and the 300-day moving average. The direction of the shorter moving average determines the direction that is permitted.
This rule states that you can only go:
short if the 25-day moving average is lower than the 300-day moving average long if the 25-day moving average is higher than the 300-day moving average.
Trades are exited in a similar way to entry , but using a 10-day breakout. This means that if you open a long position and the market goes below the low of the prior 10 days, you want to sell to exit the trade—and vice versa.
Learn to trade step-by-step with our brand new educational course, Forex 101, featuring key insights from professional industry experts.
Counter-trend Forex strategies.
Counter-trend strategies rely on the fact that most breakouts do not develop into long-term trends. Therefore, a trader using such a strategy seeks to gain an edge from the tendency of prices to bounce off previously established highs and lows.
On paper, counter-trend strategies are the best Forex trading strategies for building confidence because they have a high success ratio.
However, it's important to note that tight reins are needed on the risk management side. These Forex trade strategies rely on support and resistance levels holding. But there is a risk of large downsides when these levels break down.
Constant monitoring of the market is a good idea. The market state that best suits this type of strategy is stable and volatile. This sort of market environment offers healthy price swings that are constrained within a range.
Do note, though, that market can switch states . For example, a stable and quiet market might begin to trend, while remaining stable, then become volatile as the trend develops.
How the state of a market might change is uncertain. You should be looking for evidence of what the current state is, to inform whether it suits your trading style.
Discovering the best FX strategy for you.
Many types of technical indicators have been developed over the years. The great leaps forward made with online trading technologies have made it much more accessible for individuals to construct their own indicators and systems.
You can read more about technical indicators by checking out our education section or the trading platforms we offer. A great starting point would be some of the simple, well-established strategies that have worked for traders already.
By trial and error, you should be able to learn Forex trading strategies that best suit your own style. Go ahead and try out your strategies risk-free with our demo trading account.
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fx trading strategies, chart patterns and indicators.
Below is a great selection of Technical Analysis Chart Patterns and Forex Trading Strategies.
Ascending and Descending Triangles - This is a continuation pattern that can be used in all asset classes that uses horizontal, trend and volume to predict future movement.
Bollinger Band Bounce - Developed by technical trader John Bollinger, it uses a simple moving average combined with 2 standard deviations to break the price into upper and lower bands.
Bull and Bear Flags - This is a continuation pattern that can be easy to spot but can provide setups to explosive moves.
Bump and Run Reversed - This is a reversal pattern that forms after excessive speculation which drives prices up too far too fast.
Butterfly Pattern - This is a reversal pattern using Fibonacci numbers to predict entry, take profit and stop loss levels.
Dual Stochastic - This technical analysis strategy is based on combining a fast and a slow stochastic indicator and searching for instances where they are opposite extremes.
Fibonacci Retracements - This method of technical analysis uses the Fibonacci numbers to create levels which can indicate reversal levels.
Heiken Ashi - This indicator is used to help spot trends within the market. Heikin-Ashi Candlesticks are based on price data from the current open-high-low-close, the current Heikin-Ashi values, and the prior Heikin-Ashi values.
Ichimoku Indicator - A collection of different indicators that helps to identify trends by using multi-point moving averages that are based on the medium price of the candles sticks.
Keltner Channel Breakout - This technique uses multiple moving averages that form a middle, upper and lower range similar to Bollinger bands.
Linear Regression Channels - A statistical method to measure when markets start to trend.
MACD and RSI Reversals - This technique uses oscillators to see when markets are likely to reverse.
Moving Averages - This indicator is a key tool in every technical trader's tool box .
Rising Wedge Reversal - This is a bearish pattern that starts with a wide bottom section and the volatility contracts as the price moves higher leading to a narrower trading range.
Parabolic Curve - One of the most exciting trading patterns due to its high volatility and ability to profit from it.

Six Steps to Improve Your Trading.
Whether you're new to Currency Trading or a seasoned trader, you can always improve your trading skills. Education is fundamental to successful trading. Here are six steps that will help hone your Currency trading skills.
Successful professional traders do three things that amateurs often forget. They plan a trading strategy, they follow the markets, and they diarize, track, and analyze each of their trades.
You may have heard the adage, "if you fail to plan, you plan to fail." This is particularly true in Forex speculation.
Choose the currency pairs that are right for you.
Some currency pairs are volatile and move a lot intra-day. Some currency pairs are steady and make slow moves over longer time periods. Based on your risk parameters, decide which currency pairs are best suited to your trading strategy. Decide how long you plan to stay in a position.
Based on your currency pair selection, plan how long you want to hold your positions: minutes, hours, or days. Remember that depending on your account type, having open positions at 5:00pm Eastern Time may incur rollover charges. Set your targets for the position.
Before you take a position you should establish your exit strategy. If the position is a winner, at what rate will you cash out? If the position is a loser, at what rate will you cut your losses? Then, place your stops and limits accordingly.
Use Forex charts and market analysis to monitor market information and technical levels that affect your positions.
Use Forex Charts.
Charts are an indispensable tool to improve trading returns. You can easily recoup the money spent on a charting package from a single well-placed trade based on the analysis from professional charts. Check out XE Charts. Please keep in mind that forex trading involves a high risk of loss, and no guarantee is made that the investment on the charting applications will be recouped. Market Analysis.
XE Market Analysis provides breaking currency news and in-depth analysis where the currency market is, where it's going, and why it's going there. You can access detailed market commentary and trading strategies from experienced Forex traders.
Most traders fail because they make the same mistakes over and over. A diary can help by keeping track of what works for you and what doesn't. Used consistently, a well-kept diary is your best friend. When keeping your diary, make sure that it contains at least the following: The date and time you took the position. The rate at which you took the position. The reason you took the position. Your strategy for the position. The date and time you exited the position. The rate at which you exited the position. Your profit/loss on the position. Why you exited the position. Did you follow you strategy?
In our experience, the most successful traders are not simply the ones who take the best positions. They are the ones that are smartest about risk management and disciplined in their strategy. They are never emotional about gains or losses. They set their profit target and loss limits for their positions, and use Limit Orders and Stop/Loss Orders to lock them in.
A limit order instructs the system to automatically exit a position when your target profit has been achieved. This enables you to "lock in" your desired profit on a winning position.
A stop/loss order instructs the system to automatically exit a position when your maximum loss limit has been hit. This enables you to cap your losses on a losing position.
Professional Traders use Limit Orders and Stop/Loss Orders as the cornerstone of a disciplined trading strategy. By setting both on all their positions, they have removed emotion from the equation and are letting the market work for them.
Amateurs, on the other hand, dont use Limit Orders and Stop/Loss Orders. They stay glued to their screens, trying to juggle all their positions in real time. They miss critical action points, and they let emotion rule their decisions.
Setting Limit and Stop/Loss Orders.
As a general rule of thumb, you your Stop/Loss Orders should be set closer to the opening position price than your Limit Orders. If you do this, then you can be successful while being right less than 50% of the time.
For example, if you use a 100 pip Limit Order with a 30 pip Stop/Loss Order on all your positions, then you only to be right 1/3 of the time to make a profit.
Where you place your Limit and Stop/Loss Orders will depend on your risk tolerance. However, you need to be smart when setting them. If a Stop/Loss Order is too close to the opening position price, it can be triggered by normal market volatility. This means that a temporary dip can knock out a position before it has a chance to retrace. Similarly, if a Limit Order is set too far from the opening price, potential profit may never be realized.
There are two basic approaches to analyzing the Forex market. It is important to understand how they can be used successfully.
Technical Analysis focuses on the study of price movements, using historical currency data to try to predict the direction of future prices. The premise is that all available market information is already reflected in the price of any currency, and that all you need to do is study price movements to make informed trading decisions.
The primary tools of Technical Analysis are charts. Charts are used to identify trends and patterns in an attempt to find profit opportunities. Those who follow this approach look for trending tendencies in the Forex markets, and say that the key to success is identifying such trends in their earliest stage of development.
What should I use - Technical or Fundamental Analysis?
Traders using Technical Analysis follow charts and trends, typically following a number currency pairs simultaneously. Traders using Fundamental Analysis must sort through a great deal of market data, and so typically focus on only a few currency pairs. For this reason, many traders prefer Technical Analysis.
In addition, many traders choose Technical Analysis because they see strong trending tendencies in the Forex market. They look to master the fundamentals of Technical Analysis and apply them to numerous time frames and currency pairs.
Technical Analysis uses charts to try to forecast future currency prices by studying past market movements. Using this technique, a trader has the ability to simultaneously monitor multiple currency pairs by evaluating how others are trading a particular currency. In our experience, because so many traders use technical analysis, and their reaction to market activity tends to be similar, the validity of this technique is strengthened. It becomes a self-fulfilling prophecy that feeds on itself, increasing the reliability of the signals generated from this analysis.
Perhaps the most effective and therefore the most popular form of technical analyses is the use of "support" and "resistance". Support is the "floor" or lower boundary that a currency pair has trouble breaching. Resistance, on the other hand, is simply the opposite: it is the upper boundary that a currency pair has trouble penetrating.
Support and Resistance are important in range bound markets because they indicate the boundaries where the market tends to change direction. When and if the market breaks through these boundaries, it is referred to as a "breakout" and is usually followed by increased market activity.
Using Support & Resistance.
We can use these support and resistance levels in many ways. A range trader would want to buy above support and sell below resistance while breakout. Trend traders, on the other hand, would buy when the price breaks above a level of resistance and sell when it breaks below support.
The concept is still the same as we stated earlier. We want to buy a currency pair if we anticipate the market moving up and then sell it at higher price. We can also sell a currency pair if we anticipate the market moving down and then buy it at a lower price.
Each currency has an overnight lending rate determined by that country's central bank. If inflation is deemed too high, a central bank may raise the interest rate to cool down the economy. Conversely, if economic activity is sluggish, a central bank may reduce interest rates to stimulate growth. Lower interest rates usually depreciate the value of a currency – in part, because it attracts carry-trades. A carry-trade is a strategy in which a trader sells a currency with a low interest rate and buys a currency with a high interest.
The unemployment rate is a key indicator of economic strength. If a country has a high unemployment rate, it means that the economy is not strong enough to provide people with jobs. This leads to a decline in the currency value.
These key international political events affect the foreign exchange market, as well as all other markets.
In May of 2005, there was growing anticipation that France would vote against accepting the European Union Constitution. Since France was vital to Europe's economic health (and the value of the Euro), traders sold the Euro and bought the dollar; this pushed the Euro down so far that many traders thought it couldn't go any lower.
But, they were wrong. When France actually voted against the constitution, the EUR/USD currency pair fell by more than 400 pips in three days. Traders who bought the Euro lost thousands. On the other hand, traders selling the Euro made thousands.
Many traders take shopping more seriously than trading. Few people would spend $500 without carefully researching and examining a product. But many traders take positions that cost them well over $500 based on little more than a hunch.
This cannot be stressed enough. Most traders fail because they lack discipline. Be sure that you have a plan in place before you start to trade. Your analysis should include the potential downside as well as the expected upside. So for every position you take, you should place both a Limit Order and a Stop/Loss Order.
Set Smart Trade Limits.
For each trade, choose a profit target that will let you make good money on the position without being unachievable. Choose a loss limit that is large enough to accommodate normal market fluctuations, but smaller than your profit target. Lock these in using Limit Orders and Stop/Loss Orders.
This simple concept is one of the most difficult to follow. Many traders abandon their predetermined plans on a whim, closing winning positions before their profit targets are reached because they grow nervous that the market will turn against them. But those same traders will hang on to losing positions well past their loss limits, hoping to somehow recover their losses.
Sometimes traders see their loss limits hit a few times, only to see the market go back in their favor once they are out. This can lead to mistaken belief that this will always keep happening, and that loss limits are counterproductive. Nothing could be further from the truth! Stop/Loss Orders are there to limit your losses.
No trader makes money on every trade. If you can get 5 trades out of 10 to be profitable, then you are doing well. How then do you make money with only half of your positions being winners? By setting smart trade limits. When you lose less on your losers than you make on your winners, you are profitable.
Don't Marry Your Trades.
People are emotional. It is easy to do objective analysis before taking a position. It is much harder when you've got money invested. Traders holding positions tend to analyze the market differently in the hope that it will move in a favorable direction, ignoring changing factors that may have turned against their original analysis. This is especially true when losses are being taken on a position. Traders tend to 'marry' a losing position, disregarding signs that point towards continued losses.
Don't Bet the Farm.
Do not over trade. A common mistake made by new traders is over-leveraging an account. Just because one lot (100,000 units) of currency only requires $1000 as a minimum margin deposit, it does not mean that a trader with $5000 in his account should be able to trade 5 lots. One lot is $100,000 and should be treated as a $100,000 investment and not the $1000 put up as margin. Most traders analyze the charts correctly and place sensible trades, yet they tend to over leverage themselves. As a consequence of this, they are often forced to exit a position at the wrong time. A good rule of thumb is to trade with 1-10 leverage or never use more than 10% of your account at any given time. Trading currencies is not easy (if it were, everyone would be a millionaire!).
Be aware that trading foreign exchange on margin carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with foreign exchange trading, and seek advice from an independent financial advisor if you have any doubts.
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Fx trading strategies

If you've been looking for the best forex trading strategy, your search is over. See the best I've found in over 10 years of trading, trialling and researching. … [Get YOUR Best Strategy]
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