Top 10 Best Forex Trading Strategies For 2020Jesus
There’s a lot to digest here, so let’s begin. Let’s start by taking a look at some of the top forex trading strategies we have seen in the market recently. For this, we have organized these ten trading strategies into two groups:
- Basic strategies
- Advanced Strategies
Are you quite starting in the Forex market? Do you not know how to trade? If so, there are many ways to take advantage of new opportunities for profit. And gain control of your trading experience.
Nothing complicated for you to have good results when trading the markets. Let’s start with the basic forex trading strategies. Needless is to say that because they got grouped as basic, they are less effective than the advanced ones.
Fundamental trading strategies are nothing complicated and yet powerful forex trading strategies.
Top 5 Basic Forex Trading Strategies:
Traders selected these tactics, they are useful for newbies and for those with skill in Forex.
1. Market Trends and Price Ranges
Charting is all in this strategy, but charting with a most basic understanding of what you see in the chart. The most common way to begin the analysis is with daily, weekly, monthly, charts. When considering a long-term time frame to check between trends or price actions.
By doing this, you will gain a clearer, long-term view of the current market sentiment or situation.
After the initial overview, you can check short term time frames. For it is there where you can discover better chances for profit.
When looking at long, medium or short time frames, it is better to trade in the same direction as trends. Only if there is no defined and robust trend break.
Which takes us to our next basic forex trading strategy.
Advantages of Market Trends Strategy:
- You can see the trend from the start of the trend, which might represent a good profit ahead.
- Don’t worry about entry or exit points.
- The time needed to get on the trend is short.
- The fees per trade won’t be an issue.
- Losses can get controlled earlier.
Disadvantages of Market Trends Forex Strategy
- Breakouts get usually misunderstood.
- The hit rates get low fast.
- Missing a trade is not an option for trend hunters.
- Technical tools are not always accurate and sometimes provides faulty trends readings.
- It is never easy to trade a trend well.
Market Trends Strategy Overview
It’s vital to recognise that the markets are always changing and are unpredictable. To stay ahead of the curve and avoid losing money the best way possible, you need to be able to move with the trends.
Market trends might sound a bit intimidating, but there is no reason to feel like that. Fundamental analysis can help you know when news can be contrary or positive for an asset. Then look for that asset and trade. Above you have benefits and drawbacks. You should consider when to use this strategy.
2. Demo Trading as Strategy
This Strategy is so basic and yet so powerful that you will not grasp the power of it the first time. Have you ever trade in a demo account and noticed the free-of-stress mind you feel?
Exactly that is what we need to test our strategy. And a demo account gives us that environment, where risk is out of the equation. Instead of risk, you should add a caution. Caution of not losing too much money, even where it is fake money. Why should you mind about that money?
Only because if there is something you should trade with is caution. You develop that sense when trading in the most secure environment. You could ever have when trading forex, and that is your demo account.
It is demo trading that provides us with a real-time trading tool. For not to risk out funds and to test our forex trading strategies. When trading a demo account, you can experiment as much as trading strategies as you please. Extrapolate from there the experience you need. When you tested a strategy and see some positive results. Then its time for, in a small but real account you trade that strategy.
Only demo accounts can assure you of the testing of your strategy without the risking of your money.
Advantages of Trading in a Demo Account:
- Your funds are out of the testing environments.
- You focus on the tuning of the strategy with more clarity.
- You can have many demo accounts in different brokers without money.
- No stress when opening testing positions.
- In a demo account, you trade the real price action of an asset.
Disadvantages of Trading in a Demo Account:
- You will not make any money with a demo account.
- Sometimes brokers manipulate the setting of the demo accounts.
- Some brokers limit demos accounts tools available.
- Risk tolerance gets very misunderstood.
- The trader’s psychology won’t get tested under markets pressure.
Trading With a Demo Account Overview
Some brokers generate demo trading environment that is not real. Avoid those brokers, because there you will not get practical experience. Right before opening an account with any broker. Ask them if their demo account provides real feed for the price action. If the answer is yes, then go and do nothing yet! Because you need to verify that info. Open Yahoo Finance or any other real info chart for trading forex.
Then search for your asset. Having both tables open, compare the price action on each. There you will notice not only if the prices are realistic, but also the latency for each price feed. This will arm you with a more educated decision when deciding to open an account with any broker.
Source Day Trading
3. Support and Resistance Trading Strategy
The higher highs and the lower lows of a chart are often traced as support and resistance levels. These are levels when are about to get touched again by the price action of an asset. The levels of support and resistance traders are waiting to open their positions. Some say that the best when using this strategy is to buy when the price action gets close to the support levels. After, sell when the trend gets close to the resistance levels.
You, as a trader, expert or newbie, should know by now that markets are unpredictable. And sometimes when everything is about to happen something happens and changes it. The next support or resistance levels might take some time to reach again by the asset you are trading.
Advantages of Trading Support and Resistance Levels
- When you are learning to read a chart fast and to make a trading decision even quicker.
- The trader can understand market sentiment.
- Market conditions are easy to spot.
- Better use of the Stop-loss to protect trades.
- Develop new forex trading strategies based on breakout lines.
Disadvantages of Trading Support and Resistance Levels
- You need to use different time frames to reduce the chances of not reading the chart well.
- Any forecasting can get broken by market conditions of the moment.
- Waiting time can be longer than expected for entry confirmation.
- You don’t use Japanese candle reading.
- This strategy alone is not a good idea under fundamental events.
Support and Resistance Trading Strategy Overview
By definition, support and resistance are when the market moves up and then down. The highest point reached before it turns back down is the resistance level. When the price action reaches the lowest point before it starts to turn back up, then you call it support level. Right? But, we can also have disadvantages, worthy of consideration when using this strategy.
Source: The Balance
4. Market Price Correction Trading Strategy
Market Price Correction Trading Strategy. An excellent way to profit from a price correction is to buy low and sell high on the correction. But, trading during a price correction makes more sense for higher valued assets. (such as equity, bonds or cash).
It is, thus, better to invest in those asset classes when the correction is already happening. You don’t have to feel intimidated by this strategy. Because a market correction occurs for a wide variety of factors. From lower than expected reports to intense political climates.
Several market corrections accrued back on March 2020 because of the coronavirus pandemic. This situation caused some shares and forex, to reach the lowest level never seen in 30 years.
Advantages of Trading Market Corrections
- This Forex trading strategy is fit for traders looking to grow a strategy.
- It is useful for those trading on the American Stock market.
- Long term traders get the best results from market corrections.
- Can use another strategy at the same time to protect your trades.
- When the correction gets spotted, the profit can be great.
Disadvantages of Trading Market Corrections
- Limited conditions to make more money.
- Holding positions too long can be a wrong move.
- Riskier than the market normals.
- Brokers fees can get too heavy.
- Less attractive than other forex trading strategies.
Market Price Correction Overview
At least 10% of a downtrend or an uptrend, can get called a market correction. Of the price of any asset followed by a short upswing in the price action. Thou less attractive than many others forex trading strategies. Price correction can generate good profits and trading success. All based on trend lines, for trend lines strategy, see the following.
Source: IG Trading
5. Trend Lines Strategy
Trend lines represent the most common trading strategy. And traders used them since the beginning of the trading industry. To trade lines, you have one of the simplest and most effective charting tools.
Only by drawing an edge over the price action of an asset, you can follow the trend of the asset. Is it a bearish trend or a bullish trend? You can tell by looking at the lines and trade as you consider it can be profitable for you.
Pay close attention to a breaking trend. This might must another type of strategy and tools. Now, we will go deeper into these grouped forex trading strategies. Remember, we arranged ten forex trading strategies in two groups. The first five, the ones above, are the basic types. Those you don’t need tools or a deeper understanding of the chart.
Advantages of Trend Lines Strategy
- You can make sure that the trend of an asset is following your open positions trend.
- Discover potential support and resistance areas.
- Forecast the continuation of a trend.
- You can adjust your Stop-losses more.
- You can make your trades more profitable over time.
Disadvantages of Trend Lines Strategy
- You need the experience to know what prices to use when drawing the trend lines.
- It takes time to learn how to draw a basic trendline.
- Need more chart reading and analysis.
- It requires a proper understanding of tools. To track the price action to protect the account.
- Different tools can suggest different trend lines.
The next five forex trading strategies are the ones may experts prefer, and there is a reason for that. Let’s dive in!
Top 5 Advance Forex Trading Strategies:
You can use an advanced strategy such as stop-loss trading or limit-spread trading to gain better profit than your ordinary trading strategies. These strategies are usually applied at different times of the day and at different time intervals.
Trend Lines Strategy Overview
You can use an advanced strategy such as stop-loss trading or limit-spread trading. To gain better profit than your ordinary trading strategies. These strategies are usually applied at different times of the day. And different time intervals.
Source Wyse Trading, Youtube
1. Correlation Trading Strategy
A correlated strategy is one of the best forex trading strategies you could ever use. The main benefits of this strategy aim to increased profits. Better profitability and lower risk than regular trading strategies.
When trading forex correlated, you take two pairs like EURUSD and USDCHF. Which move 100% correlated on usual market conditions, on opposite directions. You can also go for profit on both pairs. Meaning that you will buy one and sell the other. Remember they move correlated, but in a negative way or opposite. Then, when you buy EURUSD, you sell USDCHF.
An important remark you need to keep an eye on is on the correlation ratio per pairs. For this ratio vary from time to time, you can follow this correlated ratio HERE
Advantages of Trading Forex Correlated
- You avoid opening positions on pairs that are not useful for a given moment.
- Your profits opportunities go higher.
- Your risk exposure gets diversified.
- You Cut losses.
- Avoid fakeouts and confirm breakouts.
Disadvantages of Trading Forex Correlated
- You need to track which pairs are higher correlated than others. and stick to them.
- It requires more charting knowledge.
- Correlation links between two pairs are not always obvious.
- Some correlated pairs contradict each other.
- it can be more expensive when you have to open two positions at the same time.
Correlated Forex Trading Strategy Overview
When wanting to become a correlated trader. You must equip yourself with a sound understanding of how the forex markets move. What is affecting it, and above all, your risk tolerance. Trading correlated pairs can be profitable. But the money and time you need to get there can be intimidating.
2. Forex Trading with Moving Averages
There are three types of Moving Averages:
- The Simple Moving Averages.
- The Exponential Moving Averages.
- The Weighted Moving Averages.
All them at 10, 50, 100, and 200 day periods. Moving averages belong to the set of tools we have available when we use technical analysis. Moving average trading indicators are a fantastic option for trading forex. When you are in a hurry you can use them to spot the trend before you buy or sell. And for higher returns than most other stock strategies.
MA indicator forex trading strategies are also a great way to make long term capital gains. And have a large margin of safety against extreme swings in price. There is a whole lot of information about these tools available on Youtube. Below I listed you two of my favourite videos tutorials you can follow
Advantages of Using Moving Averages
- Reduce lag in history data
- Avoid distortions from irrelevant information
- You can Plot different moving lines at once.
- Many traders prove that this strategy is one of the best.
- Once mastered, the tool will become one of your favourites.
- Sometimes moving averages can help identify support and resistance levels.
Disadvantages of Using Moving Averages
- The higher sensitivity of the EMA can lead to false signals.
- Moving Averages won’t perform well in non-trending markets.
- MA are not always indicators of future changes on prices. Because it gets calculated based on past market-generated data.
- High volatile assets are not suitable to use with Moving averages.
- You might need to analyse several time frames in other to conclude.
Moving Averages Forex trading Strategy Overview
Moving averages are trend indicators that never forecast the movement or price actions. As simple as that. It follows the price curves confirming the trend currently is taking place. It will not expect trends directions, but it can prove them.
3. Using Oscillators as Part of Your Forex Trading Strategies
Are you considering that the market is oversold or overbought? There is where the oscillators are useful. Oscillators can help us spot those markets conditions. Remember, moving averages confirms a market trend. But oscillators represent the right tool to tell us when to enter the market.
There are two types of oscillators that get used the most:
- RSI or The Relative Strength Index
- The Stochastic
Both get used, and both can bring us the right information. One of the useful information oscillators can bring us is a well-known divergence. Divergences occur when the trend of the oscillator is different than the pattern.
Advantages of Using Oscillators When Trading Forex
- An Oscillator always uses many periods to generate the signals.
- Oscillators can get used on Trend Trading.
- Small higher highs or lower lows can get traded using oscillators.
- Oscillators get placed at the bottom of the chart so that you can maximise the chart for better readings.
- Oscillators can get used as continuation patterns
Disadvantages of Using Oscillators When Trading Forex
- Oscillators measure the momentum, and not the range
- You cannot use Oscillators alone, you need to combine them with other tools.
- You need to know about candlestick charts to be precise
- The time needed to use them right is not short
- You need to be familiar with several technical tools.
Trading With Oscillators Overview
When using oscillators, you will get the most out of them if you trade stocks. An either horizontal or sideways chart or established a trend in a choppy market. When the stock reaches either an overbought or oversold condition. There is the real value of the oscillator takes place.
4. Moving Average Convergence / Divergence KNown as MACD
The Moving Average Convergence / Divergence (MACD) generate buy and sell signals. Traders use it to forecast market movements, by understanding the trend of an asset. This indicator survived over time not because it is the only one. For the fact is that there are many indicators, but MACD is one of the most effective. Particularly when displayed at the start or at the end of a trend.
Advantages of Using MACD Indicator for Your Forex Trading Strategies
- The are plenty of tutorials for you to master this indicator.
- Detect possible changes in price trends.
- This indicator, when using it right, can lead to significant profits.
- Used by traders around the globe.
- Lots of educational materials available.
Disadvantages of Using MACD Indicator for Your Forex Trading Strategies
- You need a strong understanding of how to set it right.
- It can lead to massive losses is not interpret.
- Should not get taken as a definitive signal.
- MACD provides messages, not trading signals.
- Use it with other forex trading strategies like trend lines, supports or resistance.
Macd Indicator Overview
Thou it is an important and common indicator, you cannot use it until you master it. Otherwise, you might lose money too fast and burn your trading account. Yes, it is a great tool for trading, but as any tool out there. In Forex or out, you need to know how to use it, before trying to make something good with it.
Source: 21 Trading Coach
5. The ADX – Average Directional Index
ADX helps us determine when an asset is trending or oscillating between ranges. The Average Directional Index measures how strong a market trend or direction can be. But the ADX will not state the pattern of an asset. You need to use other indicators or tools to do that. Generally, when the reading gets above 25 is a sign that the asset reaches a strong trend. Rather than fluctuating between ranges.
Advantages of the Average Directional Index
- Helps us determine when an asset is trending.
- ADX measures how strong a market trend is.
- Let us see when the market is moving sideways.
- We can see when the market is oscillating between ranges.
Disadvantages of the Average Directional Index
- ADX will not state the pattern of an asset.
- You need to use other indicators.
- You need to know how to use other technical analysis tools.
- It takes time to study the chart.
The Average Directional Index or ADX indicator is straightforward. Although an important indicator, you can use. The Average Directional Index will let you know how strong the trend is. Helping you to avoid entering the market when the markets are moving sideways.
Source: Perfect Trend System
You don’t want to go and trade, exposing your money to your feelings. The Best Forex Trading Strategies you can ever use are the ones that involve no sentiment. Trading strategies based on emotions are the ones that burn your trading account.
First, you educate yourself; then you find a legit and regulated broker. Next is to open a demo account and practice your strategy on that particular broker. Once you have clear skies, then you can try.
Remember, your money must get protected at all times, and no one will protect your money better than you. You know that, right?
For this and more information, and in case of needing educational materials. Or help for ranking your forex related site, contact me, I will be happy to help you.