To what extent fundamentals are used varies from trader to trader. At the same time, the best Forex strategy will invariably use price action. This is also known as technical analysis. When it comes to technical currency trading strategies, there are two main styles: trend following and countertrend trading. Both of these FX trading strategies try to profit by recognising and exploiting price patterns.

When it comes to price patterns, the most important concepts include support and resistance. Put simply, these terms represent the tendency of a market to bounce back from previous lows and highs.

This occurs because market participants tend to judge subsequent prices against recent highs and lows. Therefore, recent highs and lows are the yardsticks by which current prices are evaluated. There is also a self-fulfilling aspect to support and resistance levels. This happens because market participants anticipate certain price action at these points and act accordingly. As a result, their actions can contribute to the market behaving as they had expected.

Did you know that you can see live technical and fundamental analysis in the Admirals Trading Spotlight webinar? In these FREE live sessions, taken three times a week, professional traders will show you a wide variety of technical and fundamental analysis trading techniques you can use to identify common chart patterns and trading opportunities in a variety of different markets.

Sometimes a market breaks out of a range, moving below the support or above the resistance to start a trend. How does this happen? When support breaks down and a market moves to new lows, buyers begin to hold off. This is because buyers are constantly noticing cheaper prices being established and want to wait for a bottom to be reached. At the same time, there will be traders who are selling in panic or simply being forced out of their positions or building short positions because they believe it can go lower.

The trend continues until the selling is depleted and belief starts to return to buyers when it is established that the prices will not decline further. Trend-following strategies encourage traders to buy the market once it has broken through resistance and sell a market once they have fallen through support. In addition, trends can be dramatic and prolonged, too. Because of the magnitude of moves involved, this type of system has the potential to be the most successful Forex trading strategy.

Trend-following systems use indicators to inform traders when a new trend may have begun, but there's no sure-fire way to know of course. Here's the good news: If the indicator can establish a time when there's an improved chance that a trend has begun, you are tilting the odds in your favour to use the best Forex trading system.

The indication that a trend might be forming is called a breakout. A breakout is when the price moves beyond the highest high or the lowest low for a specified number of days. For example A day breakout to the upside is when the price goes above the highest high of the last 20 days. Trend-following systems require a particular mindset, because of the long duration - during which time profits can disappear as the market swings.

These trades can be more psychologically demanding. When markets are volatile, trends will tend to be more disguised and price swings will be greater. Therefore, a trend-following system is the best trading strategy for Forex markets that are quiet and trending. A good example of a simple trend-following strategy is a Donchian Trend system. Donchian channels were invented by futures trader Richard Donchian , and is an indicator of trends being established.

The Donchian channel parameters can be tweaked as you see fit, but for this example, we will look at a day breakout. Source: Admirals MetaTrader 4, EURJPY, Daily chart between 18 September to 31 May You can get the Donchian Channel indicator completely FREE in the Admirals Supreme Edition package.

It's called Admiral Donchian. To upgrade your MetaTrader platform to the Supreme Edition simply click on the banner below:. There is an additional rule for trading when the market state is more favourable to the Forex trading system. This rule is designed to filter out breakouts that go against the long-term trend.

In short, you look at the day moving average MA and the day moving average. The direction of the shorter moving average determines the direction that is permitted.

This rule states that you can only go:. Trades are exited in a similar way to entry, but only using a day breakout. This means that if you open a long position and the market goes below the low of the prior 10 days, you might want to sell to exit the trade and vice versa.

Now let's look at another system that could be the best trading strategy for you. One potentially beneficial and profitable Forex trading strategy is the 4-hour trend following strategy which can also be used as a swing trading strategy. This strategy uses a 4-hour base chart to screen for potential trading signal locations. The 1-hour chart is used as the signal chart, to determine where the actual positions will be taken.

Always remember that the time frame for the signal chart should be at least an hour lower than the base chart.

For this Forex strategy, two sets of moving average lines are chosen for the best results. One will be the period MA, while the other is the period MA. To ascertain whether a trend is worth trading, the MA lines will need to relate to the price action. The MA lines will be a support zone during uptrends, and there will be resistance zones during downtrends. It is inside and around this zone that the best positions for the trend trading strategy can be found.

Below is a daily chart of GBPUSD showing the exponential moving average purple line and the exponential moving average red line on the chart:. Source: Admirals MetaTrader 4, GBPUSD, Daily chart between 4 September to 31 May Counter-trend strategies rely on the fact that most breakouts do not develop into long-term trends.

Therefore, a trader using such a strategy seeks to gain an edge from the tendency of prices to bounce off previously established highs and lows. On paper, counter-trend strategies can be one of the best Forex trading strategies for building confidence, because they have a high success ratio. However, it's important to note that tight reins are needed on the risk management side.

These Forex trading strategies rely on support and resistance levels holding. But there is also a risk of large downsides when these levels break down. Constant monitoring of the market is a good idea. The market state that best suits this type of strategy is stable and volatile. This sort of market environment offers healthy price swings that are constrained within a range.

It's important to note that the market can switch states. For example, a stable and quiet market might begin to trend, while remaining stable, then become volatile as the trend develops.

How the state of a market might change is uncertain. You should be looking for evidence of what the current state is, to inform you whether it suits your trading style or not and should be one of the Forex strategies you should be using. Hello traders and welcome to this free analysis breakdown. In this video you will see me map the market and show possible trade areas on the CADJPY. Once this pair gives me a valid signal i will place the trade idea in to the Honest Financial Community.

I hope you have found this video educational, if you like our content then please like and follow the Entry details are shown on the chart. We're only looking for TP3. Trade history can be seen below this trade idea too for full transparency.

My trades are automated so I am not sat in front of a screen daily. Jumping on random trade ideas 'willy-nilly' The buy worked well, let's see how the sell plays out. My trades are automated so I am not sat in front of a close profit at 1.

Hello Traders I understand it's always so easy to review a trade when it's played out and ran its course. But this no lie when I say I forgot this one was even running until our script alerted me to take profit target being hit! It's taken 10 days for the pip move to land and how come I forgot about this trade?

Because our script is a simple trend follow While doing some backtesting I caught a crazy move to the downside that I just couldn't resist to share with You, plus adding some details about my strategy. Hope you guys find this helpful! Very rarely can anyone 'really' back up their solution and trading strategy like this.

They advertise hopes and dreams with profit shots without showing you 'how' and you see no proof. I know; so we were committed to provided proof. Now imagine trading in a way where you can live your normal life without being sat in front of the screen for hours a day or in Predictions and analysis. Videos only. EURUSD Technical Analysis. Unless you trade for an institution, no one tells you what you can or cannot do. You decide when to start a trade and you decide when to end it.

However, if you want to see results other than random wins and losses, you need a structure. Now, to be entirely transparent, most of these benefits apply only if you use your trading strategy as part of a comprehensive trading plan. Just read the section below. However, as in any other business, your trading will be successful only if you have a solid plan laying out what you need to do to achieve your goals.

A small store might have a strategy for how it will compete with other small stores in the neighborhood. For example, it decides to focus on providing the freshest veggies by working closely with local farmers. It might be the best strategy on earth. However, it will yield benefits only if it is part of a plan that outlines how the store will operate and grow.

From market analysis to accounting and finance, a lot goes into managing a shop. For example, the manager must specify the maximum liabilities he can have without risking the stability of the business. On the one hand, you want to come up with something that puts you in a better position than other traders. However, on the other hand, you must put the strategy into a larger context and consider your circumstances, the maximum risks you take, the markets you trade, psychological questions, and so on.

You see, the strategy and the plan go hand in hand. You need both. In fact, as we have suggested, your strategy should exist as part of your trading plan. However, you can also check out our guide on creating a trading plan. Spend some time deciding on your trading style. We have a dedicated guide to trading styles in which we talk about each in detail. Whenever we develop a trading strategy, we like to begin with a few sentences that explain the purpose of the strategy and the techniques used to accomplish the purpose.

This is a good way to organize your thoughts. Now, of course, for writing a summary, you must have an idea of the strategy you want to develop. This is where knowing your trading style is beneficial. That said, you still have to know the techniques to use and the market conditions in which you want to trade. We must always be long in bull markets, be short in bear markets, and stand aside in neutral markets.

To determine the market condition, we look at the two most recent highs and the two most recent lows. Arguably, we could have figured out a more user-friendly name for this section, but this is what happens when you spend too much time with charts and data 😂. Simply put, list every price action concept you are going to use in your strategy and explain which conditions must be satisfied for them to be valid.

Remember, the whole point of a trading strategy is to eliminate subjectivity as much as possible. You must be able to come up with your own definition for popular concepts and trade accordingly.

A forex trading strategy is a way to engage in competent currency trading. Strategies contain rules for entering and exiting your trades. This means that you must put together a collection of techniques that you follow consistently. Tossing a coin and buying when it lands on heads, and selling when it lands on tails, is a trading strategy.

It might not be profitable, but if you pair it with proper risk management, you will be around breakeven. Wherever you go, you face different rules and boundaries that limit how you can express yourself.

You were just born into a culture that has its own structure. Unless you trade for an institution, no one tells you what you can or cannot do. You decide when to start a trade and you decide when to end it. However, if you want to see results other than random wins and losses, you need a structure. Now, to be entirely transparent, most of these benefits apply only if you use your trading strategy as part of a comprehensive trading plan.

Just read the section below. However, as in any other business, your trading will be successful only if you have a solid plan laying out what you need to do to achieve your goals. A small store might have a strategy for how it will compete with other small stores in the neighborhood. For example, it decides to focus on providing the freshest veggies by working closely with local farmers.

It might be the best strategy on earth. However, it will yield benefits only if it is part of a plan that outlines how the store will operate and grow. From market analysis to accounting and finance, a lot goes into managing a shop. For example, the manager must specify the maximum liabilities he can have without risking the stability of the business. On the one hand, you want to come up with something that puts you in a better position than other traders.

However, on the other hand, you must put the strategy into a larger context and consider your circumstances, the maximum risks you take, the markets you trade, psychological questions, and so on. You see, the strategy and the plan go hand in hand. You need both. In fact, as we have suggested, your strategy should exist as part of your trading plan.

However, you can also check out our guide on creating a trading plan. Spend some time deciding on your trading style. We have a dedicated guide to trading styles in which we talk about each in detail. Whenever we develop a trading strategy, we like to begin with a few sentences that explain the purpose of the strategy and the techniques used to accomplish the purpose.

This is a good way to organize your thoughts. Now, of course, for writing a summary, you must have an idea of the strategy you want to develop. This is where knowing your trading style is beneficial. That said, you still have to know the techniques to use and the market conditions in which you want to trade. We must always be long in bull markets, be short in bear markets, and stand aside in neutral markets.

To determine the market condition, we look at the two most recent highs and the two most recent lows. Arguably, we could have figured out a more user-friendly name for this section, but this is what happens when you spend too much time with charts and data 😂. Simply put, list every price action concept you are going to use in your strategy and explain which conditions must be satisfied for them to be valid.

Remember, the whole point of a trading strategy is to eliminate subjectivity as much as possible. You must be able to come up with your own definition for popular concepts and trade accordingly. Apart from market conditions, you might employ other techniques that require a recognition criterion. Support and resistance levels, chart patterns, and candlestick formations are all examples that you must address in a similar fashion.

You might use price action techniques such as chart patterns, candlestick formations, or trendlines. You might rely on indicators or you might cut out technical analysis altogether and look at the performance of different economies.

Successful trading is more about the overall trading plan and your ability to deal with psychological challenges. Trading trends are said to be the best way to approach forex. In other words, even if you found your techniques in a YouTube video, you must understand the logic behind them.

If this is something in which you are interested, you can simply take the signals he describes and put them into your strategy. While you can borrow ideas from anyone, you must understand the underlying logic and the purpose of each element. In this situation, you want to capture market reversals.

In an uptrend, Bearish Engulfing and Bearish Pin Bar candlestick patterns are both indicating that sellers overpowered buyers during the period that the candle represents.

When these candles appear at a resistance level, where the price reversed multiple times in the past, you have a higher likelihood of catching a market reversal. Entering on a pending order further increases your chances of a profitable trade because you wait for the market to confirm that a contra-trend move is, indeed, on the way. You see, trading signals are not some random hocus pocus. If you put something in your strategy, there must be logic to it.

When the strategy is ready, you can move on to backtesting to see if your idea works in reality. After all, this is what determines whether you end up with a profit or a loss. This also means that there are two kinds of exits: one to realize a profit and one to cut off a loss.

We talk about this in detail when discussing how much money you need to trade forex. Once you have your risk on the trade, you can move on to identifying an appropriate profit target. Depending on your strategy, there are many ways you can come up with target levels. For example, Fibonacci ratios, channels, and support and resistance levels are all widely used to identify appropriate stop and profit levels.

Institutively, the distance between the entry price and take profit order is the reward you can gain on the trade. Comparing this with the risk, which we defined as the distance between the stop loss and entry price, yields the risk to reward ratio RR. The risk to reward ratio measures your potential reward for every dollar you risk.

In general, when you are a scalper or day trader, you will prefer a smaller RR. On the other hand, when you are a position trader, you will want to see a large RR. Swing trading systems can fall into both categories. As an alternative to looking for trades with a certain RR ratio, a perhaps even better approach is to have different exit strategies depending on the RR.

For example, if the profit target is close, you can simply exit the trade once the market gets there. However, if the profit target is far, you might want to scale out of your trade or move your stop into breakeven at a certain point. The next stage is to start backtesting and make improvements. We usually backtest on three years of historical market data on at least three different currency pairs.

Then we analyze the results and refine the trading signals that produce the most losing trades. We look for insights such as the situations in which most of the losing trades occurred and how we could mitigate or avoid those situations in the future.

At the same time, we carefully investigate our winners and modify the strategy to better capture those circumstances that led to winning trades.

If you do the same thing, you will eventually have a forex trading strategy that works. Do you struggle with following popular trading techniques and getting no results? Instead, you need a simple system that you like and trust.

This post will help you figure out how to develop a forex trading strategy that works. What Is a Forex Trading Strategy? Trading Styles — What Are They and How to Choose the Best One for You? The Ultimate Guide to Creating a Forex Trading Plan Step by Step. Want the inside scoop? JOIN THE COMMUNITY. Subscribe to get Forex education materials delivered to your inbox once a week. Send me great stuff Join the Community By subscribing we will send you education emails about Forex trading.

Please select all the other ways you would like to hear about us: Yes please, send me updates, eg. new blog posts. Yes please, send me offers about trading related products and services. We won't send you spam. Unsubscribe at any time. Legal Terms and Conditions Privacy and Cookie Policy Cookie Declaration Page About. Trading FX or CFDs on leverage is high risk and your losses could exceed deposits.

Any advice or information on this website is written exclusively for educational purposes. It does not contain recommendations or calls for the purchase, sale or storage of any financial instruments. All rights Reserved under US and international law.

Range Trading Range trading strategies try to extract profits from the market when it is in a lull or moving with no bias for a specific direction. To protect oneself against an undesirable move in a currency pair, traders can hold both a long and short position simultaneously. It creates a channel around the market movements on a chart. Generally, this strategy should be used alongside another forex trading strategy like swing trading or day trading. The key to being a successful trader is knowing how to predict whether prices are going up or down. Trend-following systems use indicators to inform traders when a new trend may have begun, but there's no sure-fire way to know of course. Your Money.

Categories:

• Forex
• Binary Options
• Forex Bitcoin
• Binary Options online
• Forex Brokers