Choosing a forex strategy. A brief overview of the main factors.
When choosing a strategy, just like you would contemplate committing to a person or getting a car, you need to take your personal preferences into account. As you come across a certain strategy, ask yourself: "Does it suit me? Would I feel comfortable enough?" Because if you have no faith in a strategy, you will feel discouraged after the first mishap. And these, as you know, are a frequent occurrence in trading. You will also start missing the signals which potentially can benefit you. You should be confident that it compliments your temper whether you want to hold a position for several days or open/close multiple orders.
Holy Grail is believed to be one of the best trading strategies. Although you can find different variations or similar ones online, the overall principle is the same. The main point is doing it when the price experiences a pullback. You are utilizing two indicators: moving average MA (20-period) and ADX (14-period). You can open positions not only in the beginning of a trend but when you correct it.
Wait until the +D1 line (indicator ADX) goes through level 20 upwards and stays there - that is when you can buy. Take-profit to stop-loss ration should be 2:1. Start setting the stop orders at the stop-loss relative to the closest local minimum and multiply the stop by 2.Remember not to risk more than 3% of your deposit on a single trade. You sell when the situation repeats itself but this time it is the indicator MA. Even if everything corresponds to these rules but –Dl or + Dl (indicator ADX) are close to the level 50, you should ignore the signal.
Despite its simplistic structure, the strategy still works and brings profit. The meaning behind the name stands for the candle which does not touch the moving average, not even its tail. It was initially developed for trading in the M15 interval, which means it increases the number of trades. The appropriate time to trade is during European and American sessions but you can also find entry points during Asian sessions.
The overall trend should be upward. Then we are to look for a bull candle situated above EMA 9 and wait for the moment when it closes. If the close price is higher than the max price of a previous candle, we enter the market with a long position when we open another candle. The stop-loss level coincides with the low level of a free candle. To calculate take-profit, take the size of a candle in pips and multiply by 2. We set the resulting amount of pips away from the entry level of the trade. In order to sell you need a downward trend and a bear candle lower than EMA 9. If the close price is lower than the max price of a previous candle, we enter the market with a short position when we open another candle.
Momentum and moving average indicators
This strategy is considered to be among the best scalping strategies. It suits beginners because it consists of two indicators included in the standard tools of a trading platform. The method for buying and selling are simple. You need to buy the pair when the momentum indicator graph rises above the central line and candlestick closes above average with the 20-period. The pair trades are active when the momentum indicator is below average and the current price stands below SMA 20, which is confirmed by the candlestick closing below moving average.
Take-profit is fixed – 20 pips; the stop-loss should be placed below candlestick signal. The strategy should give out from one to several signals a day. It is recommended to trade on the M30 timeframe. Average profit is 20 pips but it can certainly go higher. This method helps to make the trading system more beneficial without crossing money managing rules or enhancing risks.
This system is suitable for hourly graphs. Although you are able to trade on different timeframes, but experiences proves that the best results come from the hour intervals. This trend strategy uses filter to identify flat movements. The template, which you can download, consists of five indicators:
- AutoFib TradeZones looks for blue and red zones of maximum buy and sell. When the price gets close to the indicator red line, you should search for a sell setting the stop order at the highest level of red zone. When it reaches blue line, vice versa.
- 100 pips Momentum is similar to the moving average. When the gray line crosses the green one upwards, you sell. If it is downwards, you buy.
- TSV RenkoFX. The red grid signals the sale, the blue one signals the purchase.
- Trix4Kids. When the fine line crosses the bold line upwards and both are green, you buy. For selling trades you wait for them to be red and point downwards.
- Elliot Oscillator. The purchases are supposed to take place when the gray bar is below zero. If the blue bar is above zero, that is when you sell.
Scalping strategy ProScalpingFX
The next one utilizes large market movements generated by macroeconomic news. Due to the fact that prices have a significant impulse after news articles are published, false entries are minimal. You receive entry signals during correctional movements taking into account the US and Eurozone news. The prices tend to be higher during these time periods. You can trade the EUR/USD currency pair or any other pair that include either one, preferably with a small spread.
You would be using two indicators: Williams’ Percent Range (WPR or W %R) and Fibonacci levels. The best time is to find signals for trade entries on a M15 timeframe. These types of graphs show a lot of movement without pullback, it has to be more than 80 pips. You wait until the quotation reaches Fibonacci level of 23.6% (the first signal) and Williams’ Percent Range oscillator is less than -80 – that is when you buy. To sell you need Fibonacci level of 23.6% Williams’ Percent Range oscillator of higher than -20.
Forex signal 30
With this one you receive clear signals for opening and closing trades suitable for any currency pair. Clear signals lessen the emotional pressure and thus, help to make better trades. The interval is between M30 and H4; some suggest H1 because you have to stand by for a longer time on H1 and it generates more false signals in comparison with H1. You use Stochastic, Signal 2 and Forexsignal 30 indicators.
Algorithm for a buy: you see a big blue arrow pointing up and Stochastic indicator above level 20 (oversold zone); Forexsignal 30, which is on another graph below the main one, should have a spike pointing down. Algorithm for a sell: this time you see a big red arrow pointing up and Stochastic indicator above level 80 (overbought zone); Forexsignal 30 should have a spike pointing up. The stop-loss can start at 30 and go up to 80, it depends on a trading timeframe.
Ichimoku indicator Kijun Sen cross
Kijun Sen cross strategy can be applied to any time period but if you can, go for D1 or W1. The signal from Ichimoku indicator is generated when the price crosses Kijun Sen upwards. They are divided into strong, weak and neutral. The profit is recorded manually by means of key levels (day-, swing trading).
You can open the trade coinciding it with the crossing course when you make sure that the candlestick is closed. As soon as you enter, you should set the loss-stop of 10 pips opposing the point of entry. A precise number of pips depends on the graph and volatility of the currency pair. When the price is moving, the stop-loss is moved according to Kijun Sen with a 10 pip interval. You could utilize trailing loss as well. Always take the proximity of resistance and support levels into account. Entry is generally safer if the candlestick closed near these levels (higher or lower). You can exit the position when the price intersects Kijun Sen in an opposite direction.
Scalping strategy HeiQELA M1
It is not the most profitable strategy (about 10 pips a day) but thought to be among the most efficient. You would be leaning towards using this strategy if you were trading during European sessions. You make a relatively small number of trades – around 2-5 a day. It is caused by the filter which considers M1 timeframe as well as other time interval. You would be using Heiken Ashi 2 (settings: MaMethod 1, MaPeriod 15), Laquerre (settings: gamma 0,8, CountBars 50000) and QQE Alert MTF v.5 indicators.
When Heiken Ashi 2 is blue, the main line crosses the signal line upwards and Laquerre line is no longer in the oversold zone (not yet in the overbought zone either), you buy. The stop-loss should be set as close to the local minimum as possible. When Heiken Ashi 2 is red, the main line crosses the signal line downwards and Laquerre line is no longer in the overbought zone (not yet in the oversold zone either), you buy. Try to behave carefully when it is more than 20 pips.
1 minute timeframe
The distinctive characteristic of this strategy is its dynamic and that is why the rules call for trades on short time periods. The system should not be overfilled with indicators because the changes happen fast. Set certain rules before trading on M1 and M5 timeframes and stop trading as soon as you hit the max profit for a day. Be aware of false signals which happen a lot here.
Set two simple moving averages on the M1 graph created according to close prices with period 21 (blue) and 15 (red). The enter signal emerges when the candle which closed lower or higher than the moving averages cross is broken through. Bear in mind that before this happens, there should have been a sustainable trend. If we noticed that the pair is rising, you should wait for a signal to sell after the moving average cross pointing downwards. This strategy works perfectly for those who like spending more time in the market.
RSI and Stochastic strategy for H1
This one is not designed to accommodate big oscillations so give it a pass before big news come out. The strategy includes standard RSI with a 14-period and typical oversold and overbought levels of 70 and 30 and Stochastic with settings 8, 3, 3. The first indicator should be set on the H4 timeframe; this will let you know when to enter the market.
You set a candle, which results in the indicator RSI going out of oversold and overbought zones. The oscillator graph should overpass level 70 going down for you to enter the trade and level 30 going up to buy. At this point we leave the H4 timeframe and proceed to hourly period. The Stochastic signal line should be below the main one (red above green). In another case, the red Stochastic line is placed below the green one. Typical stop-loss is 35 pips. You close the trade when the profit hits 70 pips but you can also do in stages. If you are being conservative, you can expect 15-20% profit a month.
Positional medium bases its method on a simple moving average SMA and trend lines; some suggest using it primarily on the EUR/USD currency pair. Since it is a positional strategy, you need to open the positions following the direction of a trend. You trade on long intervals so it requires bigger deposits. But if you are keen to use this strategy, go for micro- and cent accounts. The risk should be no more than 3-4% from the deposit.
Support and resistance trend lines should strictly follow the minimum and maximum candle prices. If the SMA (4) and SMA (8) on the W1 interval and SMA (2) moving average on the D1 interval are pointing in the same direction and it also correlates to the trend, you can open the trade. You should check the trade signals only once a day. The stop-loss must be the same as previous local maximum or minimum on the day graph and additional 10 pips.
Strategies have supportive followers and people opposing it simultaneously so you cannot be sure if something is worth it before using it. If you want to make some sort of judgement at first glance, mark the following: reliable logical basis, relatively simple structure and plausible promises. Also consider picking the best part of different strategies and combining them. This way you would accelerate your learning curve and create your own method. Certainly, experience is vital but you can considerably cut that time by studying the theory first and imitating what other people do.