Forex strategies

This article is mostly ment for those who make their first steps in trading and have not yet decided what trading strategy to choose. The strategy itself depends on trader’s personality – some prefer smaller timeframes other bigger, some instrument move slower some faster, some traders feel comfortable with 1-2 trades per week, some do dozens of trades per day etc.

Although there are many different trading strategies on the financial markets. We’ll try to cover briefly some of the most popular of them, which can be modified in a countless ways according to personal preferences.

Support and resistance

basic forex strategy support resistance level

Trader defines a flat market with clear support and resistance levels. Trading is within the range until price breakout. Stop loss is put outside the channel.

  • Timeframes: All, preferably from 1H.
  • Type: no trend (flat)

Breakouts

When price trades in a range for some time, sooner or later we’ll see a breakout either up or down. Usually the breakout is very fast and volatile, so it is possible to open a trade in the same direction. Stop order is usually above the support line or below the resistance but not too close to avoid common movements and flat widening. To be sure, it is always wise to wait until at least one price bar closes below/above the flat-range line.

  • Timeframes: All, preferably from 1H.
  • Type: no trend (flat)

channel

Moving average

channel

Perhaps one of the most popular strategies. Please note that trader will get much more signals trading on smaller time frames which puts more emotional pressure. Any instrument can be chosen and any period can be set for the moving average. Back-testing on history (at least 1 year period) is required to define if chosen parameters are correct. Stop loss is usually set above/below the moving average but not too close.

  • Timeframes: All, preferably from 1H.
  • Type: directional (flat)

Oscillators

Oscillators measure strenght/weakness of a selected instrument. Oscillators work well during flat markets when there are no trends. Trader can choose an instrument and indicator’s parametres according to personal needs and back-testing results. Oscillators point out good entry points whenever market is oversold or –bought. It is wise to use a fixed stop loss when working with oscillators to avoid bigger losses if a breakout should happen.

  • Timeframes: All, preferably from 4H.
  • Type: no trend (flat)

channel

Technical formations and japanese candles

channel

History tends to repeat so are the visual formations on the charts as well as price-bar combinations. Listing all the possible combinations is not a purpose of this topic, we just give an idea where one could start. There are many visual formations that can be used: „triangles“, „flags“, „head and shoulders“ etc as well as countless price-bar combinations consisting of one or several candles.

  • Timeframes: All, preferably from 1H.
  • Type:both directional and flat

We hope it helped you to understand a little bit more about trading and gather some ideas for developing your own strategy which suits you. Traders can combine different methods or develop even their own indicators and trading robots, because there is no limit in different variations.