Forex Trading Strategies Reviews
Countless Forex trading strategies have been invented over the years, some relying on technical use of charts and numbers and others relying on a fundamental understanding of the market with reference to current events. Some have become very popular while others are only used by a minority of traders.
These trading strategies range in different levels of complexity. I will now discuss some of our expert’s favorite strategies starting with a rather simple one and moving up the complexity scale as we go along.
Every forex trader, advanced or novice, should learn how to look for support and resistance levels on the charts. It doesn’t matter if you trade Forex, commodities, stocks or any other instruments, this strategy will serve you as a baseline for your trading activity and analysis. The best thing about support and resistance levels is that a good trader can spot them even on a “naked” chart, since they are easy to identify.
‘Support and resistance levels’ is a very basic concept in trading and every forex trader must learn how to spot these levels and understand how to use them. Forex, stocks, commodities or any other instrument of trading require this strategy as a guideline which many other trading strategies are based on.
The idea behind ‘support and resistance levels’ is that history tends to repeat itself in the sense that the trend will tend to change direction at certain repeating prices. These levels are very easily spotted and analyzed because they can be seen clearly on the charts as points where the price movement changed direction.
One of the most famous and popular forex trading strategies is Fibonacci, named after the famous Italian mathematician. Considered as a medium-long term trading strategy, we use it to follow repeating support and resistance levels. History shows that the market moves in waves and Fibonacci takes advantage of this fact. Fibonacci ratios can help us identify potential resistance and support levels on the financial charts. The most common ratios are 61.8%, 50% and 31.8%.
We at FX Market Leaders love to use this method to double-check the trading decisions that our analysts take. The way to use this trading strategy is to follow a certain currency pair over different time frames. By analyzing different time frames we can spot trends on bigger and smaller scales and make a better analysis of the overall trend. While there is no limit on how many time frames to follow, we recommend to look at not more than 3-4 time frames simultaneously. A good combination can be 15 minutes chart + 30 minutes chart + 5 hours chart.
Many novice forex traders find scalping to be a great technique. Scalping is a very low-risk strategy but nevertheless allows a strong trader to make enormous profits. This trading strategy requires a great amount of patience and awareness and although it is low risk it is still very hard for novice traders to profit from it. Emotions must be set aside as they lead to compulsive actions which do not work with scalping at all.
Scalping can help you earn from changes in prices that happen over short periods. It is considered as a more dangerous trading method, since it usually involves high leverage. Good and experienced scalpers usually open a large number of trades per day, and aim for quick wins.
Understanding horizontal levels is considered by many as one of the first things that a novice trader should learn. Horizontal levels help us analyze the charts and are mostly used in combination with other Forex trading strategies, but can also be used on their own as a standalone method for trading.
Most Forex experts agree that ‘horizontal levels’ is the first thing that a novice Forex trader should learn. Analyzing horizontal levels on the charts is usually used only as reinforcement to other Forex trading strategies but in some cases can also be used as an independent strategy.
The basis to reading and analyzing charts relies almost absolutely on understanding the horizontal levels. The other factor that completes the basic chart analysis is price movement. Combining these two factors together may not give you the most thorough analysis, but it can give you a general direction of the market and the upside is that it can be done very quickly and without the need of special aids. Although ‘horizontal levels’ is a very basic strategy, it is still used by all Forex traders and some very famous Forex experts have been known to use it as a major component of their trading game plan.
This unique indicator works a bit differently from the rest of the FX indicators that traders usually use, because it indicates the strength of a market trend, and not its direction. We believe that it is a great tool for traders who are a bit more advanced and wish to get an extra help for their trading decisions from an additional indicator. The reason for its popularity is that we know that by placing a trading position at the same direction of a strong, solid trend, we increase our potential for earnings while at the same time we reduce the level of risk that we take.
After all, we all want the trend to be in our favor. ADX helps us forex traders to determine if the current trend is actually our friend. The stronger the trend is, the closer friend we found. ADX indicator helps us with filtering our trends-friends.
If you are an advanced trader who is looking for an alternative way to profit from your trade on the long run, then Carry Trade might be a good technique for you. In our article about carry trade we explain thoroughly how to use carry trade so you will be able to understand the concept behind this strategy.
In general, carry trade is buying a currency with high interest rate and putting it against a currency with low interest rate. You can earn from the difference between these two currencies as long as the currency with the higher interest rate is in your favor. For example, if you buy the pair EUR/USD, and the interest rate on the Euro is 5% while the interest rate on the Dollar is 1%, you are going to earn 4% on your carry trade.
Candlestick charts are the most common chart types used by retail traders and investors. There are other types of charts such as line charts, bar charts etc., but they don’t tell the story of past price action like candlesticks do and when trading is based on technical analysis, the decisions for future price action are made based on how the price has reacted in the past. I find candlesticks to be very useful and they are one of my favorite indicators. They work almost perfectly in volatile times, but even in less volatile times they work pretty well if used in combination with one or two other indicators.
Head and shoulders or as they appear on the Forex jargon “Shampoo” because of the shampoo with the same name, are one of many recognizable and tradable chart patterns. It consists on a high peak in the middle and two double peaks either side of that one. The higher peak is the head and the other two lower ones are the shoulders. The pattern itself looks like a head between two shoulders, hence the name.
Trend trading Forex Trading Strategy
FXML’s top analysts use trend trading as one of their leading trading strategies and always check which side of the trend they are on before making a trade or signal. The main idea behind ‘Trend Trading’ is picking a top or a bottom. Novice traders tend to think that trend trading is easy; just find the trend and trade alongside it. In practice, it’s not that easy, as with all other aspects of this game, many dilemmas pop up when trying to identify the trend.
Divergence Forex Trading Strategy
Divergence is a leading indicator used by our analysts at FXML and helps to significantly increase profits. The likelihood of entering in the right direction at the right time increases if used alongside other indicators such as Moving Averages (MA), RSI, Stochastichs, Support and Resistance levels etc.
Trading the News Forex Trading Strategy
Big announcements or news coming out of different countries can have a huge effect on the market, rendering all our analyses meaningless. In this article you will learn how to use the news in order to make profit
Hedging Forex Trading Strategy
Traders of the financial markets, small or big, private or institutional, investing or speculative, all try to find ways to limit the risk and increase the probabilities of winning. There are many Forex trading strategies out there and hedging is one of them. In fact, hedging is one of the best strategies to do just that, that’s why many large institutions use it as a mandatory component of their tactics.
The Strategy to Trading majors in 2015
Big investors, hedge and pension funds as well as good traders lay out plans and strategies in advance, usually before the quarter or a new year begins on both, fundamental and technical outlook. So we are suggesting a strategy to figure out 2015 in advance.
Trading moving averages
As traders, we have to take into consideration many things. We have to implement different factors and indicators in our analysis in order to succeed in this business, no matter if you trade short or long term. These might be fundamental indicators, technical indicators, or both. On the other hand, we shouldn´t overcrowd the charts with too many indicators that will contradict each other and cloud our judgment.
Trading the Market Sentiment
We all know that trading in the Forex market is not easy. Sometimes every technical indicator points to a certain direction but the market moves in the other direction. Other times the fundamental outlook of an economy is very bearish for the currency of that country, yet it keeps moving higher against other currencies.
Triangles and Wedges strategy
We have covered most of the important technical chart patterns in our strategy section during 2015. There are still some strategies left though. “Triangles” and “Wedges” are two of the 10 most important chart patterns and in this article we´ll explain how to trade them. It´s true that they are different patterns, but they are very similar so we´ll teach both of them in one article.