What is a Forex Trading Strategy?

 

A Forex trading strategy is a method of trading Foreign Exchange currencies based on a predefined set of rules and techniques. A Forex trading strategy includes several components:

• a detailed trading plan that contains objectives, taxes, and time horizon
• trading setups that include the conditions of entering/exiting the market
• money management (MM) that includes trade sizes, rules to limit risk exposure, and conditions to achieve portfolio diversification

 

Key Points

• The implementation of all trading strategies includes four stages: planning, back-testing, adjusting & optimizing, execution
• It is important to use detailed trading setups and wait for the market to move to your setups, not the way around {Never modify your setups to catch the market}
• Money management is your insurance to uncertain market conditions and the key to your long-term success

 

Common Forex Trading Strategies

 

These are some common Forex trading strategies {According to time frames: -Longer-Term → Shorter-Term}

 

■ Carry-Trade Strategy

Carry Traders are among the most profitable Forex traders. Carry Trade means selling a low-interest-rate currency and buying the same amount of a high-interest-rate currency. The concept is to make money based on the interest-rate differential. The key is to open positions at the right time. The right time means that a Forex pair has recently completed a correctional wave and it is ready to move in the opposite direction.

More on Forex-Investors.com: ► Carry Trade Strategy

 

■ Fundamental Trading Strategy

 

The fundamental Forex strategy involves opening positions in the Foreign Exchange market based on hard data and fundamental analysis. In general, the fundamental analysis aims to anticipate future market conditions based on the analysis of key economic indicators and hard macroeconomic data.

More on Forex-Investors.com: ► Fundamental Strategy

 

 

 

■ Swing-Trade Strategy

Swing trading involves opening and closing positions that last from several days to several weeks. The key is to find a strong trend that is near to complete a correctional wave. Traders must use low capital leverage and accept the trades only if the Reward/Risk ratio is more than 3.

More on Forex-Investors.com: ► Swing-Trade Strategy

 

■ MACD Divergence / Pivot Points Strategy

This is a reversal strategy based on MACD divergences which are very reliable on spotting potential reversals (M30 to D1 charts). After detecting a divergence between MACD and the Price Chart, the trader must make sure that the price is near a pivot point. If these two conditions are met, the trader opens a position at the opening of the next candle.

 

■ Intraday Trading Strategies

Trading intraday is very risky and not suitable for all Forex Traders. In order to evolve as a successful intraday Forex trader, you need to have a very specific trading plan, a money management system, and discipline in order to implement both. A set of logical rules covering all market conditions can help you when you are trading in tiny timeframes.

More on Forex-Investors.com: ► Custom Intraday Trading Strategy

 

 

■ London Momentum Trade

When the London session commences (08:00 am GMT), the Forex market volatility booms. This strategy is very effective when a pair starts to move directionally or it retraces from an area of strong support/resistance.

 

 

□ Best Forex Trading Strategies

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