Trading strategies
Trading strategies are the algorithms and rules that traders follow in order to obtain predictable results and profit. The section presents multicurrency, arbitration and scalping strategies, principles and basic requirements. The strategies of the pending orders and classic Alligator and their strengths are highlighted. Both beginners and experienced traders will find a strategy they like.
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Forex h4 strategies are usually built on indicators or the analysis of supply and demand, one of the interpretations of which are different levels, including the Fibonacci. First of all, let us review a simple but effective strategy called “Defile SAR”.
As it has become obvious from the name, this method is based on the standard Parabolic SAR indicator – you should set a step equal to 0.002 in its settings and leave the maximum leave as the default – 0.2. It should be emphasized that the following rules will be valid only for the EUR/USD pair – the other tools will require optimization given the volatility.
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Before looking for profitable Forex strategies, you need to clearly understand that the price chart alone is not enough in practice. Some traders argue they are trading exclusively on pure charts, but as practice shows, it is the result of years of experience and a good knowledge of the instrument, which the beginners lack by definition. So today we will review a reliable indicator system, as well as a methodology for analyzing reports of the Chicago Mercantile Exchange.
So, what is the difference between profitable Forex strategies on indicators and obviously unprofitable options? First of all, it is about mathematics, statistics, and understanding of the principles laid down in the formula, because the indicator is a simple calculator, not a random number generator.
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Divergence is quite a strong signal that precedes a reversal or at least a slowdown of the trend. Forex Master Method provides using a series of filters and the divergence as a key signal to open positions.
Creator of the trading strategy, Russ Horn, uses its own classification of divergences by introducing hidden and extended divergences besides the classical (countertrend) one. Tradelocator EA will carry out search for divergences.
At the regular bullish divergence, the price chart draws two or more consecutive minimum, while the indicator observes increasing minimum. At the bearish divergence, the picture is reversed. At the hidden bullish divergence, the two increasing minimum on the chart correspond to 2 decreasing minimum on the indicator.
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As you know, the currency market significantly differs from the others because it is predominantly an OTC market. This is why if you try to apply the strategy of, say, the stock market to the currency market, there will be a lot of confusion and substitution of notions. One of these methods is Forex Arbitrage strategy, which can be met in different variations online and in the books, but not all the information is true and applicable in practice. But first things first.
The first thing a beginner faces when looking for profitable strategies is an aggressive advertising of arbitration advisors and programs. In most cases these are literally fraudulent schemes that are aimed at exploiting the imperfections of software and hardware of the dealing centers (hereinafter DC).
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This article will review a Profit System strategy. This strategy is based on moving averages and a derivative indicator, Parabolic SAR. The trading strategy is mechanical, i.e. the trader must open and close deals on his own, as well as set the levels of take-profit and stop-loss. Below we’ll review the cases when it is worth to buy and when to sell. As for the scope of the considered strategy, it can be used on any timeframe and with any financial tool (currency pair).
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Trend trading is one of the most profitable but simple trading methods. The beginners are recommended to get familiar with this trading style at the first place, but the professionals also never neglect the trend and often follow it under their main strategy. The difficult part here is to define the beginning of the trend, which is very difficult and sometimes even impossible. Therefore, trend following often starts in its middle or after the main phase of growth. Today we will review Trend Rider strategy, which will help us to ride the trend.
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This article will review a strategy which made its mark in traders’ wide circles. Forex Smart strategy is a powerful tool for a trader of any level, and allows receiving high profit, which is largely due to trading in 4-hour timeframe. Clever strategy is based on the time-tested indicators and is simple enough to learn, thus immediately attracting a lot of attention of both experienced and beginning traders.
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Any trader knows that Forex market (unlike stock market) has its limits, which are relatively predictable. For instance, if we consider a euro/dollar pair, many would agree that euro rate is unlikely ever to exceed $ 5. If company’s stock can grow infinitely, the exchange rates always have averaged values. Extreme TMA trading system is based on this rule. A trader can use this system with any currency, and the recommended time interval is 15 minutes.
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Recently – over three years ago – a new trading system dubbed "Revenge" emerged online. Lots of online traders immediately started using it. Its name speaks for itself, at the first place. Of course, many experienced traders would show little interest, because the market doesn’t allow anything beyond incredible. However, interest prevails, and we believe that it is worth taking a look. Anyway, no trader will suffer from simply reading about it.
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Using Renko charts is quite a peculiar approach to Forex trading. It is a form of the price dynamics and price trends expression in different flats than the time intervals. The time, of course, is present as a factor, but not in the first place. That is, while a simple price candlestick chart reflects the behavior and dynamics of prices based on the time frame, the Renko chart is based on another dimension – namely, on the price movement measurements. Thus, no matter how much time has passed, the price movement will be reflected by the next candle only after price passing ten points. Such approach is not just another dimension – it is an entirely new strategy named Renko charts.
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Efficiency of trading strategies is based on several factors, which, in their turn, have their own degree of importance. For example, any trading strategy should have prospects of the development and improvement. At the same time, some objective laws exist: no matter how perfect your strategy is, at hourly intervals there are more false signals than on daily ones, for instance. This is a fundamental factor. But first things first.
The most important feature of structure of the efficient Forex strategy is the right balance of two or three indicators that this strategy contains. If the strategy doesn’t include indicators, but is instead based on a candlestick analysis or trend lines, then the efficiency of this strategy is mostly based on personal skills of the trader.
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Selection of the time period is crucial for the trading strategy. The effectiveness of the trading process depends on how the timeframe is consistent with the style of trading and the most important the trader’s character. The traditional classification of time frames is as follows. Long-term time frames are the strongest, followed by medium-term and then short-term timeframes. Trading in each of these periods has its pros and cons.
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A very important and necessary step in the online trading is to test Forex strategies. Any trader understands that without preparation, without a proven trading strategy it is meaningless to start trading, it is the same as if you move trough a minefield without a sapper. But here, I want mention some differences. Do not confuse the testing of indicators and testing of strategies. And because it's important we will not consider trading system based on a single indicator. So, let’s put it in order. To test strategy primarily means to test all of its components. This is the main indicator, oscillator and if provided the support and resistance line at the same time. In order to test the trading strategy, you should to do it manually, visually following the history or trading on a demo account. Another option is to test the main indicator, which lies in the basement of the entire trading strategy, with the help of the program advisor. In this case, you can begin to test all trading strategies when the options you want to have are chosen and the results you need have gotten. Let us describe the way of testing Forex strategies in details.
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There is a common wisdom that all traders will sooner or later come to the conclusion that the optimal timeframe for online trading is one day and more. However, it is difficult to say is it true or not, because basically the difference between timeframes is determined rather by the size of the deposit and the free time which trader has. There is, of course, the presence of the so-called "noise" movements at the less than one day intervals, but fractal analysis settles this problem as well by applying mathematical calculation for all hardly predictable price movements. Nevertheless, Forex trading systems in the interval less than a day make not a daily profit for many traders only, but also the perfect combination of energy spent and the income which was made.
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There are many trading strategies which work in the foreign exchange market. Sooner or later, every trader finds such a trading system that reflects his character most accurately. All people have different perceptions of risk and work with different intensity. For example, there are some players who tend to trade exclusively on long-term charts, and refer to the terminal occasionally only to check or adjust the trading positions.
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Among the many forex strategies those which are based on the moving average lines are probably the most common. Usually they are referred to as Moving Averages. This instrument is the easiest one for analyzing the current market situation, and therefore the most common one. Everyone knows about the simplicity of genius.... But let's focus on our specific issue and see, what is the moving averages Forex strategy.
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The Internet trading pays much attention to an instrument called XAU/USD, in other words, gold. At the first sight the gold trading does not differ from any currency pair trading. But it is not right. This strategy has a number of distinctive factors which should be considered, as they play a role in the gold trading strategy itself. Even if you look at the price chart for this precious metal, you will notice that it there are much less volatile fluctuations on it. Gold is moving more directly and has less "noisy" movements in large time frames. Of course there is an explanation, but we will reach it further.
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Basically, a majority of foreign exchange traders use short-term methods of work in the market, and sometimes medium-time methods. Constantly making transactions and being in the center of financial world activity, every day they control the trading process. And the use of an approach based on the long term, is quite rare. Despite of this, long-term forex strategies can certainly become interesting and alternative ways of earning money.
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The situation when the price movements are in a strict directed trend, not in the narrow price range, is common enough for the market. And in this case the stable forex strategy which is called "3 ducks" is the most effective strategy, moreover due to its simplicity it is used quite often.
It should be mentioned also that the stable forex strategy concept is a kind of a vague term, in this article we would like to show a high probability for making a profit provided that all strategy conditions were met.
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Trading in the foreign exchange market - a risky venture. And the question here is, of course, the financial risks. People who decide to engage seriously in currency speculation, at first often puzzled searching win-win technique. Is there such a win-win strategy for forex? Or is it just a myth? This article will attempt to answer this question.