8 Forex Trading Strategies for 2024
Check out some of our top tips for trading Foreign Exchange in 2024
You can be confident that you are employing a high-quality Forex trading system that works for you if your Forex trading strategy is well-reasoned and back-tested. That internal confidence will make it easier for you to adhere to the principles of your Forex strategy and, as a result, will aid in the maintenance of your discipline.
We examine eight of our top forex trading methods, which you can start using right away.
What works for you
There is no single answer when determining the greatest Forex trading strategy. The finest Forex trading strategy must be tailored to the person. This implies you must evaluate your personality and determine the ideal Forex trading technique for you. What works for someone else might not work for you.
In contrast, a method that has been dismissed by others may turn out to be ideal for you. As a result, experimentation may be required to identify effective Forex trading tactics. It can also get rid of those that aren't useful to you. A time frame for your trading style is an important factor to consider.
There are various Forex trading technique styles ranging from short to lengthy timeframes. These techniques have been widely used throughout the years and continue to be a popular pick from this year's list of the finest Forex trading methods. In their quest to learn how to trade Forex successfully, the finest Forex traders are always aware of the various styles and methods.
You can try to choose the best trading strategy for you by looking through the list of what are thought to be some of the best Forex trading methods available below:
50-Pips a Day Forex Strategy
The 50-pips-per-day forex technique, which takes advantage of the early market move of several extremely liquid currency pairs, is one of the newest methods for trading forex. The best currency pairs to trade with this specific approach are the GBPUSD and EURUSD currency pairs. Two positions or two opposing pending orders are placed by traders following the closing of the 7am GMT candlestick. The other position is automatically closed when price fluctuations activate one of them.
The stop-loss order is placed anywhere between 5 and 10 pips above or below the 7am GMT candlestick, following its formation. The profit target is set at 50 pips. This is put into practice to control risk. The market will now take care of the remaining details after these are established. Both day trading and scalping are quick-hit Forex trading techniques. But keep in mind that shorter-term investing indicates higher risk because it involves more trades, therefore it's critical to practise effective risk management.
Below is a screenshot of the MetaTrader 4 trading platform provided by Admirals, showing the EURUSD H1 chart from the Zero.MT4 account:
The orange boxes show the 7am bar. In some instances, the next bar did not trade beyond the high or low of the previous bar resulting in no trading setup unless the trader left their orders in the market.
Daily Chart Forex Strategy
Daily charts are preferred by the most skilled Forex traders over shorter-term tactics. A Forex daily chart approach involves less market noise than the Forex 1-hour trading strategy, or even those with shorter time-frames. Because of their lengthier duration, these Forex trade setups have the potential to yield some of the best trade setups and possibly even some of the most profitable trading systems available, giving you the opportunity to make over 100 pips every day.
Although there are no guarantees in trading, daily Forex method indications have the potential to be more dependable than signals from lower periods and to yield higher profits. Additionally, traders don't have to worry about erratic price swings and daily news. The daily Forex strategy is based on 3 core principles:
- Locating the trend: Markets trend and consolidate, and this process repeats in cycles. The first principle of the Forex daily strategy is to find the long drawn out moves within the Forex market. One way to identify a Forex trend trading chart is by studying the price data over the last 3 months. Identifying the swing highs and lows will be the next step. By referencing this price data on the current charts, you will be able to identify the market direction.
- Staying focused: This requires patience, and you will have to get rid of the urge to get into the market right away. You need to stay out and preserve your capital for a bigger opportunity which is the key to success in a daily time frame Forex strategy.
- Using larger stop losses: Be aware of the large intraday swings in the market. Using larger stops, however, doesn't mean putting large amounts of capital at risk but it does help to deal with the random volatility that can develop during the day, which is why it makes it to the list of trading strategies.
Forex 1-Hour Trading Strategy
With this Forex strategy, you can benefit from the 60-minute time frame. With this Forex trading technique, the best currency pairs to trade are EUR/USD, USD/JPY, GBP/USD, and AUD/USD. The most appropriate Forex trading strategy resource for this kind of approach is the MACD, which can be found on MetaTrader 4 and MetaTrader 5.
A long trade can be entered when the MACD histogram crosses the zero line. One possible stop loss location would be a recent swing bottom.
When the MACD histogram drops below the zero line, you are ready to enter a short trade. One possible area for the stop loss would be a recent swing high.
An hourly chart of the AUDUSD is shown below. The situations where the MACD histogram has crossed and crossed below the zero line are represented by the red lines:
Source: Admirals MetaTrader 4, AUDUSD, H1 chart (between 20 May 2020 to 31 May 2020). Accessed: 29 November 2023 - Please note: Past performance is not a reliable indicator of future results or future performance.
Forex Weekly Trading Strategy
A weekly Forex trading plan can offer more stability and flexibility, but many traders prefer intraday systems because of the market volatility, which presents more possibilities in shorter time periods. A weekly candlestick offers a wealth of market data. Lower position sizes and staying away from excessive risk are the cornerstones of weekly Forex trading methods.
The most popular price action trading patterns, including engulfing candles, haramis, and hammers, can be employed by traders for this approach.
In Forex trading, one of the most widely utilised patterns is the hammer, which resembles the picture below:
The opposite of the hammer is the shooting star which looks like the image below:
The chart below shows the weekly price action of NZDUSD and examples of the patterns shown above.
Price Action Trading Forex Strategies
Every trader uses fundamentals to a different degree. The greatest Forex strategy will always make use of price activity at the same time. Technical analysis is another name for this. Trend following and countertrend trading are the two primary types of technical currency trading methods. These two FX trading techniques aim to make money by identifying and taking advantage of price patterns.
Support and resistance are two of the most crucial ideas in price patterns. In a nutshell, these phrases reflect a market's propensity to recover from prior highs and lows.
The market's propensity to rise from a previously made bottom serves as support.
The market's propensity to decline from a previous high is known as resistance.
Market participants often compare subsequent prices to current highs and lows, which is why this happens.
When the market gets close to its recent lows, what happens?
Simply put, consumers are drawn to things that they perceive as being inexpensive.
When the market gets close to its recent highs, what happens?
When prices are perceived as excessive, sellers will be drawn to them, and purchasers will want to secure a profit.
Thus, the benchmarks used to assess current prices are the recent highs and lows. Both resistance and support levels have a self-fulfilling element. This occurs as a result of market players acting in accordance with their expectations of certain price movement at these times. Their activities may thereby help the market to behave as they had anticipated.
Still, it's important to remember these three points:
- Support and resistance levels are just a frequent result of market participants' normal behaviour; they do not represent absolute principles.
- The goal of trend-following strategies is to make money when resistance and support levels collapse.
- The goal of counter-trending trading strategies is to buy at new lows and sell at new highs, which is the opposite of trend following.
Trend-Following Forex Strategies
A market may break out of a range by going below or above the support or resistance levels to begin a trend. What causes this? When support fails and a market falls to new lows, buyers tend to hold back. This is due to purchasers consistently noting lower prices being established and preferring to wait for a bottom to be reached. At the same time, traders will be selling in panic, getting driven out of positions, or accumulating short positions because they believe it can go lower.
The pattern will continue until the selling is exhausted and purchasers' confidence returns when it is evident that prices will not fall further. Trend-following methods encourage traders to purchase when the market has broken through resistance and sell when it has broken through support.
Trends can also be powerful and long-lasting. This type of technique has the potential to be the most profitable Forex trading strategy due to the size of the moves involved. Trend-following systems employ indications to alert traders when a new trend has begun, but there is no guaranteed way to know.
The good news is that if the indicator can identify a period when there is a greater likelihood that a trend has begun, you are increasing your chances of using the finest Forex trading strategy. A breakout is an indication that a trend is developing. A breakout occurs when the price moves above or below the highest high or lowest low for a set number of days.
As an example.... A 20-day breakout to the upside occurs when the price exceeds the highest high of the previous 20 days. Because of the long timeframe - during which earnings can vanish as the market swings - trend-following techniques necessitate a specific mindset. These trades can be more mentally taxing. When markets are turbulent, patterns tend to be more masked and price fluctuations are larger. As a result, for Forex markets that are both quiet and trending, a trend-following technique is the optimal trading strategy.
A Donchian Trend system is a superb example of a simple trend-following approach. Donchian channels were devised by futures trader Richard Donchian and are a trend indicator. The Donchian channel characteristics can be adjusted as desired. Here we look at a 20-day breakout.
A Donchian channel breakthrough indicates one of two possibilities:
Buying if the price of a market rises above the previous 20-day high.
Selling if the price falls below the previous 20-day low.
A daily chart of EURJPY with the Admiral Donchian indicator set to 20 bars is shown below.#
When the market conditions are more beneficial to the Forex trading system, there is an additional guideline for trading. This criteria is intended to filter out breakouts that deviate from the long-term trend. In summary, you look at the 25-day and 300-day moving averages (MA). The allowable direction is determined by the direction of the shorter moving average. According to this regulation, you can only go:
In a nutshell, if the 25-day moving average is less than the 300-day moving average.
If the 25-day moving average is greater than the 300-day moving average, go long.
Trades are exited in the same manner that they were entered, but only with a 10-day breakthrough. This indicates that if you initiate a long position and the market falls below the prior 10-day low, you may want to sell to get out of the trade, and vice versa. Now consider another system that can be the ideal trading technique for you.
Counter-Trend Forex Strategies
Most breakouts do not turn into long-term trends, therefore counter-trend techniques rely on this fact. As a result, a trader employing this technique aims to profit from the tendency of prices to bounce off previously established highs and lows. On paper, counter-trend tactics have a high success record, making them one of the greatest Forex trading strategies for boosting confidence.
However, it is vital to emphasise that strict risk management controls are required. These Forex trading strategies are dependent on support and resistance levels remaining stable. However, there is a risk of significant downside if these levels fail. Constant market monitoring is an excellent idea. This type of technique works well in a steady and dynamic market. This market environment provides healthy price movements that are limited within a range. It's crucial to remember that the market can change its mind.
A steady and calm market, for example, may begin to trend while being stable, then become turbulent as the trend develops. It is difficult to predict how the situation of a market will alter. You should seek for proof of the current situation to determine whether it fits your trading style and should be one of the Forex methods you employ.
4-Hour Forex Trading Strategy
The 4-hour trend following approach, which can also be utilised as a swing trading strategy, is one potentially advantageous and profitable Forex trading strategy. This approach screens for probable trade signal locations using a 4-hour base chart. To decide where the real positions will be taken, the 1-hour chart is used as the signal chart.
Always keep in mind that the time period for the signal chart should be at least an hour lower than the time frame for the base chart. For the best results, two sets of moving average lines are used in this Forex technique. The 34-period MA will be one, and the 55-period MA will be the other. The MA lines must be related to the price action in order to determine whether a trend is worth trading.
In the case of an uptrend, the following conditions must be met:
The price movement is above the MA lines.
The 34-MA line is higher than the 55-MA line.
The MA lines are ascending.
In the event of a decline, the following conditions must be met:
Price movement is below the MA lines.
The 34-MA line is lower than the 55-MA line.
The MA lines slope downward.
During uptrends, the MA lines will act as a support zone, and during downtrends, they will act as a resistance zone. The finest positions for the trend trading method can be found within and around this zone.
A daily chart of GBPUSD is shown here, with the 34-exponential moving average (purple line) and the 55-exponential moving average (red line):
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