How to Succeed in the Forex Market : Best Forex Strategies
Forex is a popular currency trading platform. Many traders use this market to make money. However, the success of trading is determined by the choice of strategy and its competent implementation. Someone manages to get a good income, while others are disappointed by unsuccessful attempts at currency trading.
Forex strategies are a certain set of rules and principles that guide you while trading. Each trader chooses the most suitable method for himself. In this case, you need to take into account individual preferences, willingness to take risks and the time that you intend to devote to this matter. In this matter, there are many subtleties and nuances that a trader should take into account.
Finding a Win-Win Forex Strategy
Today on the net you can find information about strategies that guarantee 100% profit on Forex. You should not believe such materials, since any trading is fraught with risks. So no one guarantees you income. You can become a millionaire or burn out by spending all the funds of the deposit.
Finding a win-win strategy is a road to nowhere because there is none. Yes, there are approaches that increase the likelihood of income. But the same method may not work for different traders. In some cases it will be successful, in others it won't. It is also important how consistent you will be in implementing the chosen approach.
Relevance of the Strategy
3-35% of traders receive regular income on Forex. Usually, beginners are in a hurry to make money here and do not pay due attention to studying this area. Such traders quickly become frustrated as they lose their money.
To make a profit, you need a combination of the following factors:
Strategy Development;
Systematization of work;
Compliance with the rules.
The strategy assumes a certain trading system within which you operate. This is a plan chosen by you, and you cannot deviate from it. The strategy defines entry and exit rules, loss limits and position volume. You also choose a currency pair and set a time interval.
This mechanism contributes to the timely entry into the market and the successful closing of the position. You make a good profit from this. Of course, traders are not immune from failures here. But with proper organization of work, losses can be minimized. In this case, you will have more profitable transactions.
A trading system or strategy is like a traffic signal that regulates traffic. An experienced player will be able to recognize these things and act on the signals received. A professional trader is guided by the state of the market and does not follow emotional impulses. It builds on the chosen strategy and focuses on the available indicators.
Usually, traders have difficulty in determining the optimal entry into the market. Having a plan will allow you to discard the doubts that arise and clearly focus on the signals. For example, to determine the time to open a trade, you can take into account the following indicators:
Achievement of the established level of cost;
Intersection of instruments;
Price direction forecast;
Combination of shapes.
Some people think that in the absence of a plan, the number of profitable and losing trades will be approximately equal. However, practice shows that in reality everything happens differently. If a trader does not have a strategy, then sooner or later he will lose the funds of his deposit. Therefore, you cannot do without a specific plan that you will use in Forex.
Beginners Forex Trader
Beginners should resort to working strategies. At the first stage, you need to get acquainted with the market, learn how to read charts and trade successfully. Only then will you be able to combine different strategies and add something of your own to them. An independent strategy must first be tested. Experts advise doing this for six months.
To do this, you should use a demo account in order to avoid the risk of losing your own funds. You will also have the opportunity to make some adjustments if you see the need. If the trading strategy shows its effectiveness, it can be used for real transactions.
But beginners should not rush to create their own tools. It is better to take the time to learn and use ready-made strategies. If you correctly determine the entry and exit points to the market, you can make good money on Forex.
Choosing a Strategy
So, study the Forex market, determine the right trading plan for yourself, and then apply it according to your vision. First, understand the essence of the strategy and analyze its effectiveness, then you can improve this mechanism a little.
To make a profit on Forex, you need to choose the right moment to make a deal. In addition, the period of opening and closing a position is important. You also need to decide on market analysis. There are other factors to consider as well. Let's look at all these points.
Duration of Holding Positions
Given this parameter, the strategy can be of 3 types:
- Short-term
- Medium-term
- Long-term.
1. Short-Term Strategy
Short-term transactions are those that are opened and closed within one day. Among such strategies, intraday and scalping stand out. The intraday option implies the conclusion of up to 5 simple transactions, while you can use different tools.
Scalping allows you to make up to 200 trades per day. The duration of such contracts can vary from a few seconds to half an hour. This method is quite complicated, and only experienced traders can make money on it.
2. Medium-Term Strategies
Medium-term strategies are designed for trading from 1 to 14 days. Before entering the market, a trader needs to perform an analysis. Only then is it worth investing your money in foreign currency. With this method, you can also trade using leverage, but not more than 1:3.
3. Long-Term Strategies
Long-term strategies involve the conclusion of contracts for a period of several months. This approach keeps you much less stressed and eliminates the need to constantly monitor the state of the market. It will be enough for you to spend 15 minutes a day on it. When used correctly, this method can bring you good money. To do this, you need to be able to make correct predictions.
Fundamental and Technical Analysis
To predict the movement of the foreign exchange market, you need to be able to analyze. This skill largely determines the success of trading. A trader who makes a deal without prior analysis will fail in his activity.
Moreover, fundamental and technical analysis is important. In the first case, news is taken into account and economic indicators are taken into account. In the second, special price charts are applied.
The trader is obliged to take into account the factors affecting the market. These are political, economic and natural events. And some of them may be unexpected. News also differs in the level of its significance.
As a means of technical analysis, candles, other figures, a cost chart and additional ones are used. indicators. This analysis is better suited for a short-term strategy in a non-aggressive market. This strategy takes into account the historical data of the exchange rate. Trends are identified, on the basis of which a forecast is made.
1. Graphs
Technical analysis involves the use of different tools, among them:
Figures;
Indicators;
Candles.
Patterns can indicate a continuation of a trend or a reversal. To navigate these charts, you need to be able to recognize specific patterns and know their meaning. Professionals recommend being careful with triangles. They can mean a change in trend and its continuation.
Technical indicators become good helpers for entering the market. But you should not choose several of these tools at once. This will lead to confusion and hinder the effectiveness of the analysis. Using numerous indicators, it will be difficult for you to make good money. At the same time, leaving one indicator is also not worth it, it is better to take into account 2-3 slightly different signals.
Japanese candlesticks are also used for analysis. These are rectangles where the price minimum and maximum lines are located above and below. White indicates growth, black indicates decline. Candlestick patterns on the chart allow traders to quickly understand the state of the market. If you use all these types of analysis, you will be able to develop the best Forex trading strategy for yourself.
2. Psychotypes of Traders
Each person has certain innate characteristics. These factors influence our behavior. Therefore, a trader needs to take into account his own temperament.
For example, a choleric seeks to make a profit as quickly as possible. Due to natural features, such people do not have enough patience. They are not inclined to enter into long-term contracts, they are often overwhelmed by emotions. Cholerics are in a hurry and make banal mistakes, which leads to the drain of the deposit. But traders with such a psychotype can learn how to make money. These people are well suited for medium-term strategies. The best option would be to trade with hourly and 4-hour charts.
Cholerics should not give up on a long-term strategy either. But here you need to apply strict risk management. Traders in this group need to learn self-discipline. If the choleric curbs his emotions, subordinating himself to the rules, success will become quite real.
Sanguine people are determined to get the maximum profit. But unlike choleric people, they are ready to make the necessary efforts for this. If a sanguine person fails, it does not unsettle him. Such people continue to go to their goal and achieve results. The best option for traders of the sanguine psychotype would be a short-term or medium-term strategy. At the same time, it is important to take into account possible risks and potential profit. In long-term transactions, a sanguine person may lose interest, so they are not suitable for him.
Melancholics are cautious, but they often trade under the influence of feelings and emotions. The actions of such traders are not consistent. Therefore, melancholics need to protect themselves with stop loss and take profit strategies. This will minimize losses or lock in profits. Melancholy people should also not trade with leverage. Such people are more suitable for long-term transactions.
Phlegmatic is inherent in balanced decision making. These are calm and responsible traders who succeed more often than others. They are consistent and disciplined in their actions.
However, such people are inherent in natural slowness, which should also be taken into account. For phlegmatic people, any scheme is suitable, but most of all, a strategy with tight stop losses.
Of course, the features of the human personality are much more complicated than the framework of the described psychotypes. But knowing your temperament will help you choose a strategy that is convenient for you. At the very least, you can immediately weed out options that are definitely not suitable.
3. Professional Level
You need to objectively evaluate yourself as a trader. If you are a beginner, you are unlikely to be able to immediately earn big money in the Forex market. You'd better take your time in pursuit of quick profits. Carefully study the market and familiarize yourself with the strategies of famous traders.
Without the positive experience of others, you will not be able to succeed. So a novice trader should not refuse to learn. Otherwise, you won't get far on enthusiasm alone. Without basic knowledge, you will not be able to earn anything. Read relevant literature, watch educational webinars and improve your level.
Of course, in parallel with this, you can start trading. But it is better to do it on a demo account or start by investing small amounts. However, some experts recommend that you first undergo training and only then start trading currency.
Users with experience in Forex should also expand their knowledge base. This will allow you to develop as a trader, which will increase the likelihood of good earnings. So the learning process must be continuous.
Objectively assess your level of trading and select a strategy in accordance with it. It is important that the trading plan fits your capabilities.
4. Trade Time
Decide how much time you can devote to Forex trading. There are no restrictions here. A trader can make a profit even trading 10 minutes a day. It depends on the time you have.
For people employed in their main job, a strategy with intraday trading will not work. In this case, it is better to give preference to positional trading. You will be able to analyze the foreign exchange market in your free time. If you have a shift schedule, it makes sense to try more profitable strategies. This will allow you to effectively combine trading and your main work activity.
But in any case, successful Forex trading requires experience. You will develop it over time. It is better to start with small investments, gradually increasing them. Success comes only to disciplined and persistent traders.
Also, be sure to give yourself some rest. For your brain to process information effectively, do not trade 1 day a week. Learn to restore your own strength and "recharge batteries." Practice shows that work without rest does not contribute to more earnings. Any person gets tired and loses his effectiveness. Our body is not designed for a 7-day work week.
Best Forex Strategies
Consider some examples of strategies, among them:
trendy;
countertrend;
based on SMA moving averages;
position trading;
NFP;
scalping.
1. Trend and counter-trend strategies
Trend strategies take into account trends observed in the foreign exchange market. Changes periodically occur here, and the exchange rate goes out of the previous range. It is important for a trader to catch the time of the minimum and maximum. In this case, you should focus on indicators that act as hints.
For example, Rafaqat Ali advises buying assets if the price is above the high of the previous 20 days. If the rate is set lower than in the previous 20 days, the currency must be sold.
There are other trend strategies. This type requires special thinking, but you can make good money on it. The main thing is to be able to recognize the time of the beginning of a new trend. Such a point is called a breakthrough.
1.2 Countertrend Strategy
The countertrend strategy is based on a different philosophy, but does not contradict the previous approach. Breakouts are not viewed as long-term trends. When prices begin to move away from the previously set low and high, the trader takes advantage of the new trend. This approach allows you to extract good profits, but it also carries risks. Therefore, strategies of this type require compliance with strict rules.
3. SMA Moving Average Strategy
This simple approach is based on the ratio of risk and reward. Use indicators and then decide whether to buy or sell. Set up the SMA period and timeframe, and then see what happens to the price. If the value of the currency pair is above the SMA line, this will be a buy signal. The opposite situation will be a reason for selling the currency.
Of course, such a strategy does not guarantee you 100% results. There may be inaccuracies in this forecast. Therefore, it is better to use another additional indicator in order to more accurately predict the movement of the market.
4. Position Trading
This is an advanced strategy, considered one of the most profitable. It is practiced by leading traders who have achieved success in trading. This approach is convenient in that you do not need to pay constant attention to this process. But the position should be closed only after a serious analysis of the market.
Such trade can be carried out from one month to a year. Successful implementation will require a clear plan and the ability to predict the further movement of the market. In this case, you should pay special attention to the choice of currency pair.
In this case, consider volatility and margin. You may be interested in a currency pair with high long-term volatility. Political and economic events can have a significant impact on the course change here. Pairs with low short-term volatility will slowly move in the direction you want, which will also provide profit. Choose to trade with low margins, and the amount of leverage should not be large.
5. NFP Strategy
This strategy is based on an indicator published every month in the United States. It affects the price of currency pairs with the participation of the US dollar. However, you can use this strategy no more than once every 30 days. But such news determines the direction for the further movement of the market. By predicting the results of the NFP indicator, you can make a good profit.
At the same time, one should not forget about the stop-loss tool, which allows minimizing losses. This is extremely important when the market moves in the other direction. The NFP strategy will allow you to earn more or lose less.
6. Scalping Strategies
We have already mentioned scalping a little, but we will touch on this strategy again. This is a short-term trade for people who are used to completing tasks in the shortest possible time. Such a strategy leaves a double impression, since it is not suitable for everyone. In scalping, you can make big money or go bust.
Experts advise to adhere to the following recommendations:
Do not open a position for more than 5 minutes;
To get a good profit, you need to conclude a lot of transactions;
The strategy is more suitable for day work;
You need to spend a lot of time bidding;
Consider the ratio of risks and rewards;
Do not neglect the stop loss.
This strategy is not suitable for people who do not have the right amount of time. It is also important to be able to cope with stress and not succumb to emotions. Usually scalping is not suitable for traders with a choleric temperament. But there are exceptions to this rule.
Of course, there are other strategies, but we limited ourselves to the examples given. Everything is individual here, so the optimal choice depends on many nuances.
Practical Tips About Forex Trading
1. How to learn to earn on Forex?
2. What recommendations will increase the likelihood of making a profit?
Do not believe the promises of an easy way to earn money.
Do not look for win-win strategies.
Constantly learn trading and analyze the market.
Carefully approach the choice of strategy.
Stick to the approach you chose.
Use a demo account to test your strategy.
