Designing the right forex trading strategies that would work for you
Forex trading strategies are a group of fixed principles that you follow as a trader. These strategies help you make a profit from the forex market and allow you to enter or leave the market when it’s necessary. Hedge funds, investment companies, traders and banking institutions also use forex trading strategies for making important investment decisions. In the day to day financial market, using these strategies can alleviate a lot of anxiety.
However, you should remember that prior to laying down the strategies in place it is important to understand your forex trading goals.
Some popular forex strategies
Given below are some intermediate to advanced foreign currency trading strategies that can work for you. You can learn these strategies from various online resources. It can be assured that with discipline and good understanding, you can get the ideal strategy that would work for you and open the door to success.
* Breakout Method
* 1-2-3 Pattern Strategy
* MACD Divergence Strategy
* 25 EMA-50 SMA RSI Strategy
* Daily Method
* Pin Bar Method
* Keltner-Channel Williams Strategy
* Bollinger Bands Stochastic Strategy
Developing a suitable foreign currency trading strategy
Formulating a suitable forex trading strategy requires time and plenty of experimentation. The principal components in formulating a strategy comprise the following:
* Reward (the amount of money you’re willing to earn)
* The risk (the amount of money you’re ready to lose)
* The method of your trade (is it most suitable for short or long-term trading)
* The market fluctuations
* The currency pairs you want to trade
* The time period you’re most comfortable with
The most effective technique to check the productivity of a foreign exchange trading strategy is with back testing. Under back testing, the previous historical price data is used along with a particular strategy to evaluate how productive the strategy is. The outcomes are separated into number of successes and number of failures. No strategy can be absolutely foolproof. Had it been so, the world would have been inundated with millionaires. The accuracy of highly productive strategies ranges from 85% to 90%.
You can use strategies manually or automatically. Manual trading does have a tendency to carry some shortcomings as compared to automated trading since you might be influenced to modify some principles and become involved emotionally. Manual trading is suitable for a disciplined and skilled trader. In contrast, automated trading takes into account the arrangements that should be followed and responds in accordance with them. There is no sentiment involved.
All trading strategies are useful but the only difficulty that many traders face is that they are not sufficiently disciplined to stick with them. If you’re a novice trader, then it is advisable that you spend some time knowing the fundamentals prior to venturing into using some of the above mentioned strategies. Subsequently, know more back testing to try out these strategies on a demo account till you think that you’re comfortable to use them.