6 Free Forex Trading Strategies That Work
In order to trade on the foreign exchange market, you need to know some of its practical and theoretical foundations. There is a minimum, without which you simply cannot trade and will quickly lose your money. Therefore, spending a few minutes reading this article will not be in vain, and, perhaps, will save you from making critical mistakes.
The basics of forex trading include things like: general concepts, technical aspects of making deals, fundamental and technical analysis, and basic strategies for trading. In the classic sense of the word, the foreign exchange market is all about currency trading, but thanks to the expanded capabilities of the trading platforms these days, it is now possible to trade precious metals, stocks, contracts for differences, and other instruments.
Understanding the Fundamentals
Without a doubt, one of the most important aspects of successful trading on the foreign exchange market is choosing one or several trading strategies and sticking to them.
Most modern-day trading strategies can be divided into five groups:
- 1. Trading based on the trend, where transactions are carried out based on the direction of the price movement;
- 2. Trading via price channels that are based on existing levels of support and resistance;
- 3. News trading, which is based solely on fundamental factors;
- 4. Scalping, the act of opening short trades and making a profit with a large number of operations;
- 5. Automatic trading with the use of advisers or special robots that can autonomously open and close orders.
Once you have chosen a strategy that is right for you, one that fits your trading style and psychological character, you should bring it to perfection by correcting any existing shortcomings.
The basic fundamental concepts of Forex form the basis on which you continuously improve your trading skill set, so try to teach yourself to do a few things from the very beginning. This includes: being able to constantly analyze the market, knowing where and how to place stop orders, analyzing the results of previous transactions, and identifying and eliminating errors from future deals.
The Benefits of Scalping-based Trading Strategies
If we compare this approach to trading with other popular methods, we can distinguish a number of obvious advantages. Among them are:
- Quick earnings. In contrast to other long-term strategies, which are mostly based on fundamental analysis, scalpers can rely on income on their very first day of trading. This is the type of result that most newcomers expect from investing in the foreign exchange market. Following this kind of strategy from the very first days of trading, your deposit will gradually increase with results to show for it, should you avoid doing mistakes;
- Ease of use. Almost all scalping strategies rely on using the same type of indicators. All the traders have to do is to set them up correctly and simply wait for the right situation to enter the market. Following the relatively simple rules that most scalping strategies abide by, the bulk of your transactions will be net positive;
- Small deposits. Even a small capital of several hundred dollars can gradually develop into substantial capital and experience a rolling snowball effect in a small amount of time. Remember, that when purchasing or selling currency, we use only a certain percentage of our total deposit. Usually in the 5-10% range. While the percentages are to remain the same, the size of the transactions will gradually increase, depending on how quickly the capital is growing, of course;
- Interest in scalpers by brokers. Rookies may find that quite a few brokers do not like traders who prefer using scalping strategies. However, if the scalper has chosen an honest company that works according to the standard practices and withdraws clients’ transactions to the interbank market, then, on the contrary, it is highly interested in users that utilize scalping strategies. The fact of the matter is that the broker’s income is dependent on the commission for each transaction, the spread, as it is called. As a result, scalpers tend to bring in considerably more profit to brokerage firms in comparison to clients working with long-term strategies.
The Disadvantages of Scalping-based Trading Strategies
You should not rush with the decision and immediately start using the first available scalping trading strategy. Like all others, they have their drawbacks, which every experienced trader should know about. Among the disadvantages of scalping are:
- Risks. Despite the numerous benefits of scalping strategies, they are far from being called risk-free. If the trader somehow installed the indicators and signals incorrectly, then there is a significant chance to go into the negative. Even if you adhere and act according to the rules, not all transactions will be profitable;
- Lack of fundamental analysis. Like many trend-based trading strategies, scalping is based solely on technical analysis. In other words, the trader takes into account the only movement of the instrument’s value, not bothering to understand the fundamental reasons for the changes in these price fluctuations;
- The need to constantly be at the workplace. Traders who use fundamental strategies tend to conclude several deals in a month. They can spend considerably less time at the monitor, as it is more important to analyze the incoming news and to be aware of all ongoing major events. Using scalping-based forex strategies, traders will have to devote most of their time towards actual trading and constant monitoring. You will need to sit at the monitor, waiting for a signal to enter the market. In addition, you are expected to observe the price’s fluctuation in order to be able to close the transaction manually in time;
- Not all brokers support scalpers. When a broker offers spreads that are equal to zero, then it is likely that they do not want to work with successful scalpers. In this case, there is a conflict of interest, since the broker will not earn anything from your transactions, while constantly having to bring them to the market. In some cases, the trading platform does not even reflect the real situation on the market, hence, the quotes can be very different. In these kinds of situations, scalping will only bring you losses.
Forex Scalping Strategies That Work. Scalping trading TOP strategies.
“Press” Trading Strategy
Unlike other strategies that can be used on most major currency pairs, Press is best suited for use when trading with GBP/USD. When using this strategy, stick to using a five-minute schedule. You will need to rely on the following indicators to follow this strategy:
- MACD (5, 8, 9);
- SMA (8);
- PSAR (0.1 and 0.11).
Make sure that PSAR is installed on top of MACD. To do this, use the overlay function in the trading platform.
This scalping strategy will be most beneficial in the event that transactions are concluded during the most active trading sessions. Since we are trading pounds and dollars, the London and New York trade sessions are the best. You need to follow these simple rules when buying currency:
- The major part of the closed candle is above the SMA (8);
- PSAR points, that are superimposed on top of the MACD indicator, are located below. The same goes for the main chart;
- MACD bars are located above the zero line.
This strategy has several different approaches. In the first case, we can set a Stop Loss and Take Profit at a distance of 15-20 points from the entry point to the market. Another option is to use the Stop Loss command exclusively. We observe the movement of the value and gradually raise the Stop Loss to break-even level. This approach allows you to achieve maximum benefit from every single transaction.
For the sale of currency, the signals are opposite. The “Sell” order should be placed under the following conditions:
- PSAR points on both the value chart and the MACD are located higher;
- The closed candle is below SMA (8);
- MACD bars are located below the zero line.
Transactions must be concluded immediately after the lines of the indicators intersect. If you missed this moment, it is better to wait for the next occasion to enter the market. Take Profit should be set at 10-30 points from the entry point, and the size of the Stop Loss is to be determined depending on the size of the last candle, or 2 times less than the Take Profit.
“Bamboni” Trading Strategy
If you already have some experience with scalping strategies, then you can move on to some more complex methods, such as the Bamboni trading strategy. To use it, you need a sufficiently large number of indicators. Among them are:
- SMA (100) and SMA (200);
- Fisher yur4ik;
- Paramon Scalp;
- Signal Bars 6;
- EAtrend using i_trend.
We recommend using these indicators on a chart with a time interval of M15. With this trading strategy, you can find points of entry for purchasing and selling currency. You can open a “Buy” order under the following conditions:
- SMA (100) is higher than SMA (200);
- The price chart breaks through SMA (200);
- On the EAtrend indicator, the green line crosses the red line.
The Sell position should be opened if we see the following picture in the chart:
- The SMA (100) breaks through the SMA (200) in an uphill fashion or is already above this indicator;
- The price chart crosses the SMA (100) and the next bar has been closed below the indicated indicator;
- On the additional EAtrend chart, the red line crosses the green line in an uphill fashion.
Do not forget about the Stop Loss and Take Profit commands, which are set at a distance of 25 points from the entry point. You can also close the transaction manually if you need to. To do this, focus on the indicator Fisher Yur4ik. If it changes its color, then you should immediately close the deal.
“Triple Indicator” Trading Strategy
This strategy relies on the following three tools:
- Laguerre with levels 0, 0.1, 0.9 and 1;
- EMA (120) with Median Price (HL/2);
- CCI (14) with levels -5 and +5.
Some of the above indicators may not be available on the trading platform right away, but they can be easily found online and downloaded. Scalping on these three indicators will allow you to make 10-15 points from a single transaction. To do this, set a Take Profit at an appropriate distance. Stop Loss should be placed at the same level. It is worth buying currency under the following conditions:
- Laguerre indicator is equal to 1;
- EMA (120) shows negative dynamics;
- CCI is above level 5.
“Outsider” Trading Strategy
A relatively simple and profitable option for earning through scalping, which is suitable for traders of all levels of trading experience. For this strategy, you need to set an exponential average EMA (9) and stick to an M15 time frame chart. We recommend trading in GBP/USD with this one.
Particular attention should be paid to candles that are one point away from our exponential average during the closure. Once a similar situation has developed in the market, you can initiate a new order with the advent of a new candle. Therefore, if the price falls – we sell, if it grows – we buy. The size of the Stop Loss and Take Profit is bound to be equal to the size of the candle that served as a signal for entry into the exchange.
“FX Prime” Trading Strategy
This method can be successfully used with a variety of currency pairs, but it is best to give preference to those that have the smallest spreads. This will let you make a lot more profit. Search for entry points into the market with a time interval M1 or M5. In order to implement this strategy, you will need the following tools:
- EJ CandleTime;
- Heiken Ashi Smoothed;
Using this strategy and following all the rules will make the risk of capital loss relatively small. Therefore, when opening a position, you can use up to 10% of your investment capital. The bulk of the transactions will be positive and around 1 in 5 will lead to losses. Veterans will know that these are incredible odds in the world of forex. Stop Loss and Take Profit should be set at a distance of 15 points from the entry point. The Buy order is to be used under the following conditions:
- CCI 170 is above the zero line and basically shows a positive upwards movement;
- On the RSI chart, the indicator crosses the 55th line from top to bottom;
- CCI 34 repeats the movement of the previous indicator.
Selling the currency is worth it in the event that the situation on the market is completely opposite. If the transaction does not close automatically by placing Stop Loss and Take Profit, you can do it yourself. This is where the auxiliary tool in the form of Heiken Ashi comes in. Should the indicator change colors, it is worth closing the transaction as quickly as possible. Another signal to exit the market could be the CCI crossing of the zero line.