Forex Trading Strategies That Work

Forex strategies that work are easier finding you might have ever imagined. The first thing you have to do is define what you mean by “work”. You can save a lot of time if you’re looking for the “holy Grail” of Forex such as a system that never has losing trades. The way can save a lot of time is to not look at all because no such system exists. Keep in mind that no one ever became rich in Forex trading by waiting around for the absolute “perfect” system. Now they were grounded in reality let’s discuss some real strategies.

Trend following strategies — Trend following is one of the easiest ways to profit in Forex trading. We use the term easy here loosely because the first thing we have to do before you can follow a trend is identify the trend. There are basically three different directions that th emarket can go, either up, down, or sideways. Trend followers look to profit in either up or down markets. We’ve all heard the saying “the trend is your friend”. This is the mantra that trend followers live by.

One simple method of trading with the trend is to trade using charts of multiple time frames. You can have your favorite indicator, such as moving average on each chart. For instance, you may have moving averages setup on each of a daily, 4 hour, and 15 minute charts. Assuming we are trading based upon the smallest timeframe to enter the trade we would go long when the price of the currency pair is above our moving averages on each of the three charts we mentioned. Using multiple time frames gives the trader the advantage of confirmation.

Our simple example above was done using moving averages, but the multiple time frame trading method can be done with indicators or without indicators. The multiple time frame strategy works great when used with breakout systems as well. This works well for entering both long and short positions.

When currency pairs are in a trading range, meaning that the prices are basically moving sideways you can profit using simple countertrend methods. A simple countertrend method would be to use support and resistance in the opposite way as may be used in breakout systems. In this case you would sell a currency pair when the price moved up to a resistance level and buy a currency pair when the price moves down to a support level.

Naturally, the above-mentioned examples of Forex trading strategies that work were for the purposes of illustration only and are not to be construed as an exact method to use. They are designed to give you a starting point for your own experimentation to find the right set of parameters for you.

Forex Trading Strategies That Work

The one common denominator of all traders is that they want Forex trading strategies that work. The truth of the matter is that there are wide variety of trading strategies that work very well. The real key is finding the Forex strategy works well for you.. your account size, your personality, lifestyle, etc. Let’s cover a few of the characteristics of strategies that work.

Positive Mathematical Expectation — It should go without saying that the “work” in Forex strategies that work refers to a strategy that has a positive outcome. There were be little point in creating or using a strategy with a negative mathematical expectation, because we are not involved in the Forex market to lose money. This is not to be taken lightly as many beginning traders look at available strategies that in the long run will not end up being profitable for them.

Created by Someone Competent — A good Forex strategy must be created by someone that knows what they are doing. There’s a lot of software out there that allows inexperienced people to create trading strategies. The downside of this is that if you’re inexperienced then you currently not in a position to evaluate whether or not you have truly created a strategy that will perform in the future as it has in the past. I would venture to say that the vast majority of Forex trading systems you see floating around the Internet perform poorly. If you are going to create your own strategy first learn how to evaluate Forex strategies prior to creating one of your own. Those inexperienced in creating Forex trading systems often times focus on such things as percentage of winning trades. Any experienced Forex trader can tell you that focusing only on the percentage of winning trades in trying to reach a goal of 90% to 100% is an exercise in futility.

Has Clearly Defined Rules — A good Forex strategy will have clearly defined trading rules outlining such essentials as, what currency pair trade, when to get in, when to get out, etc.

Eliminates Guesswork — A good trading strategy should eliminate any guesswork and subjectivity. The clearly defined rules we mentioned above should take care of this.

If you’re new to Forex trading and looking for Forex trading strategies that work your very first step should be to learn how to evaluate Forex strategies. By learning how to evaluate the differences between the good, the bad, and the ugly, you will not find yourself at the mercy of someone else’s overly-biased opinion.