Due to the opportunity to get high profits with a small investment of own funds, trading on the international currency market attracts an increasing number of traders. However, in order to receive a regular income from trading, it is not enough to open a deposit with a broker, select a currency pair and open a deal in the trading terminal.
It is necessary to take into account many nuances: from understanding the situation on the market to a specific trading plan (Forex trading strategy). We will talk about the latter aspect in this article.
We will give examples of simple and profitable trading strategies on various timeframes with a detailed description and screenshots from the MT4 trading terminal and an open account with a reliable broker NPBFX .
This article will be useful not only for novice market participants who are just learning the basics of trading, but also for practitioners – we will consider the most profitable Forex strategies and, perhaps, you will take note of some strategy and successfully apply it in your trading practice.
Types of trading strategies
Depending on the Forex indicators used, trading time, trend, acceptable risk level, traders use a variety of types of strategies.
Let’s get down to business and consider the main and common types of trading strategies for making deals on the Forex market and describe in detail the algorithm for their application.
By trading time, strategies are divided into
- Short term. Transactions on short-term strategies are concluded within the day without transfer to another day. Intraday trading allows the trader to make a good profit, but on the condition that he understands the market well and can make the right decision. Sometimes it can be very difficult to predict which direction the price will go, so while there is a chance of making a good profit from a trade, short-term trading is associated with increased risk. This type of trading strategy is popular with scalpers .
- Medium-term. With medium-term strategies, trading orders are held from two days to several weeks. If you choose the right medium-term trading strategy, then a trader can get a good profit from 50 to 200 points or even more. An important condition for using medium-term strategies is the presence of an active trend in the market.
- Long-term. These trading tactics are popular mainly among large market players (for example, banks or investment funds). Orders can be opened for several months and for a profitable outcome of the transaction, patience and endurance are needed, as well as good preparation before entering the market in the form of a thorough analysis.
According to the method of opening an order, Forex trading strategies are divided into
- Trendy. In trend trading, a trader opens a trade in the direction of the trend. The key to the success of such a transaction is to correctly identify the market trend.
- Countertrend. With a counter-trend trading strategy, a trade is opened after a strong price impulse in the opposite direction to this movement. This type of strategy is considered risky, but if all trading rules are followed, it can bring significant profits to the investor.
According to the method of market analysis, profitable Forex strategies can be
- Indicator. Indicator trading strategies are based on the use, as is clear from the definition, of various indicators. Such trading involves receiving signals from the indicator and using them to determine the best entry point into the market.
- Non-indicator. When trading without indicators, the trader analyzes the price chart and looks for patterns that will indicate the further direction of price movement. Patterns can be various figures (pin bars, doji candles, etc.) formed on a candlestick chart and giving an idea in which direction the price will move.
Trading strategies by type of market entry
- Test trading. Breakout orders are usually placed at high volatility in the market, when price quotes sharply change their values after breaking through local extremums. With this type of trading, a large stop loss level is set .
- Pullback trading. When trading from a pullback, a trader evaluates the potential of a price move and opens a trade with a small stop loss level. Usually they trade from a rollback if the price moves in a zigzag pattern.
According to the type of technical characteristics, trading strategies are
- Automatic. Automatic trading currency strategies independently analyze the current market situation and, based on it, open and close transactions. The participation of a trader in such trading is minimal. The trading algorithm (this is most often a Forex advisor ) does everything for him.
- Manual. With a manual trading system, the trader independently analyzes the market, after which he personally decides to open a deal. Technically, the trader also performs all operations for managing an order “ manually ”.
In accordance with the type of analysis on the basis of which the trading strategy is built, there are
- Trading systems based on technical analysis. Trading using technical analysis involves a thorough study of the price chart and the search for certain patterns on it.
- Forex strategies based on fundamental analysis. And when trading based on fundamental analysis, the trader studies the macroeconomic indicators of the country in whose currency he trades, as well as all kinds of important economic news, earnings reports, etc. It is also possible and even necessary to conduct a combined analysis of the Forex market