Trading manuals insist that you must have a trading strategy for successful trading. When you have a forex strategy, you get more clarity in the trading process, which helps in minimizing trading risks. As a trader, following a forex strategy to the letter helps you to avoid mistakes in an unpredictable market. You do not need to wonder when to enter or exit a trade. The trading strategy will let you know the appropriate time to enter or exit the market.
Some of the most commonly used are forex trading strategies based on:
- Bollinger Bands
- Technical indicators
- Moving averages
- Fibonacci retracements
- Technical analysis and price patterns
- Trend trading strategies
- Flat trading strategies
- Fundamental analysis
Three of the most profitable Forex trading strategies
These strategies help you make a basis for how to develop a trading strategy. Here are the most profitable trading strategies:
Scalping is a trading strategy that profits from tiny shifts in prices. The profits on such trades are taken swiftly once the trade becomes profitable. All trading requires some discipline. Trade volumes are high and the gains small, so a scalper must strictly adhere to the trading system and avoid one significant loss that can wipe out all previous successful trades.
A scalper takes numerous small profits without running winners to grab gains as and when they become available. The aim is to carry out a successful strategy via the many winners instead of a few sinning trades with large trade sizes. The Bali Scalping strategy is a strategy designed for short-term frames. Its more suitable for day traders and suggests short stop losses (SL) and Take Profits (TP).
You choose the indicators in the Bali strategy technology to get an early signal to buy or sell. This gives you ample time to check the market moves and confirm the fundamental factors.
2. Candlestick Strategy
The candlestick trading technology is a weekly trading strategy used to trade positions using different currency pairs. This strategy depends on a price movement’s spring principle. To trade, you need a chart in any terminal and a W1 timeframe. You need to estimate the candle bodies of various currency pairs and then select the longest distance from the candle opening to close within the week. This pair will be the one to open a deal at the following week’s beginning.
Suppose the candle during that week was bearish. The position will be long, and if it was bull, the position will be short. In the middle of the week, close the order if it hasn’t closed via profit or stop, then wait for the beginning of the following week to repeat the procedure.
3. Parabolic SAR Indicator Strategy
The Parabolic SAR strategy is an indicator that marks the direction the market is moving towards. It also attempts to give you entry and exit points. SAR is short for stop and reversal, and the indicator is several dots placed either above or below price bars. A dot below the price bar indicates a bullish trade, and a dot above indicates bearish. A change in the dot’s positioning suggests a change in the trend is happening.
Characteristics of a Successful Strategy
A successful and profitable strategy is made different by various features.
- The least number of lagging indicators, meaning the fewer the indicators are, the higher the forecast’s accuracy.
- How simple the strategy is. Understanding your strategy matters more than its saturation with schemes, elements, and formulas.
- Unique: Your strategy should be tailor-made to your specifications, circumstances, character, trading style, etc.
For many forex traders, the basic analytics are confined to operating within the confines of the economic calendar. Some events may have a short-term effect on an asset’s value, but you cannot predict the price impulse direction. To trade successfully in the forex market, you must create your unique trading strategy. The strategy must be unique and simple enough for you to understand and customized according to your needs and trading style.
Out of the many trading strategies, the three highlighted strategies are the most commonly used and the most profitable. However, you can use any other strategy that works best for you.