PROFITABLE FOREX STRATEGY

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Many new traders often think that they need huge winning trades to make money and be profitable. This is not only a common misconception but an extremely limiting way of looking at things. Profitable trading strategies look different and need to be matched to your goals.

The psychological boost a trader gets from having his or her first profitable forex strategy is huge. It gives you the confidence to believe that earning a living from forex trading is possible and that helps persevere through any difficulties.

As you can image, something like the above image of a pin bar occurs quite frequently in forex markets and most of the time the pattern does not offer a tradeable opportunity that gives the trader an edge over time.

The combination of a trend trading strategy, a known area of support like a Fibonacci retracement level and a short-term price action reversal pattern like the pin-bar make for a reliable edge in the market. Using a 2:1 risk to reward ratio based on the height of the pin-bar candle makes sure to exit the trade quickly after a pattern failure and let profits run.

The example above uses a daily chart but the pin-bar pattern can be traded on any timeframe (for example in a 4-hour forex trading strategy) but the higher the timeframe, the more reliable it becomes.

A few years ago, driven by curiosity, I took my first steps into the world of algorithmic trading in forex by creating a demo account and playing out simulations (with fake money) on the Meta Trader 4 trading platform.

MT4 comes with an acceptable tool for backtesting a forex trading strategy (nowadays, there are more professional tools that offer greater functionality). To start, you set up your time frames and run your program under a simulation; the tool will simulate each tick, knowing that for each unit it should open at certain price, close at a certain price, and reach specified highs and lows.

We can observe this in almost every forex trading forum that there is. There are literally hundreds of forum threads with traders, particularly beginners, who all want to find the most profitable Forex trading techniques that they think will make them rich in no time if they learn it. They spend hours searching the internet and even hand out large sums of cash to internet Forex scammers who convince them that they can sell them the perfect profitable trading strategy that will make them win every trade and make them rich. They quickly find out that this is not the case. In Forex, there is not a simple Forex strategy, there is no Holy Grail.

Every Forex trader is different. We all have different personalities, different talents, and different goals in life. This means that we all have different thoughts on what profitability means to us. For one person, it may mean a consistent way to earn a few more bucks a month on their day job salary. For another person, it may be a way to save up for retirement. For someone else, they may see it as a way of being financially free from having to work a 9-5 job, meaning that they would become profitable only when they could replace their current salary. For the sake of this article, we will speak of profitability as the ability to consistently make profits over a period of weeks, months or years. This way of measuring profitability does not depend on any dollar amount like the others would have. Rather, it just means that you are making some gain in percentage on your money either every week, month or year and that your overall money increases steadily as time goes by.

Every trader must keep in mind though, that his version of what profitability is, is what he should focus on. This will help him to make the right trading decisions, help to measure the amount of risk he is willing to take, and also choose the right trading strategy that suits his needs.

It is easier for high risk adrenaline junkies to trade with the best Forex trading strategies for scalping with little problems. For a trader that is less inclined to take high risks or trading highly volatile time frames like the 5 min chart, he may be more comfortable using Forex day trading strategies instead. A trader needs to be aware of the amount of stress that he is able to handle, because high stress will encourage traders to engage in behaviours that are bad to his trading. High stress will encourage him to enter his position too early, or too late. It may cause him to exit profitable trades early, and let his losing trades run for too long. A high stress environment may also increase the negative emotions like fear and greed, and affect the ability of a trader to stay disciplined to his strategy.

This is usually one of the things that beginner traders do not consider important when they are first learning how to trade Forex. They think that following the popular way to trading regardless if they are able to commit to the hours involved is the way to go. It is self-explanatory why this is a foolish way to trade. If you cannot dedicate yourself to sitting diligently at your charts daily for extended periods of time, then short term trading may not be the right option for you. Scalping strategy and day trading strategy requires long periods of focus. If you cannot give it, then you may want to consider trading the longer time frames like the daily, weekly, or monthly charts.

The best forex strategy for consistent profits, for any trader, will be a simple profitable forex strategy. There are many different strategies that Forex traders can find on the internet to suit their tastes. The ones that work the best however are the ones that are the simplest to understand and to follow. Because there are different types of trading, it would be difficult to assign one trading strategy as the most profitable forex strategy. As such, we have gathered the most profitable strategies for each major type of Forex trading.

A very profitable forex strategy in scalping, is one which allows you to have many trade opportunities while offering for some amount of stability. The following strategy is fairly easy to follow and will satisfy the scalper who is looking for multiple trade opportunities during his sessions.

This scalping strategy is based on the 5 exponential moving averages, on the 5 min chart. To follow this strategy, a trader must first place the 5 EMA High, and the 5 EMA Low on his chart. He can choose any currency pair, but it must be noted that this strategy works best on a ranging market.

For this strategy, a trader will be looking for candles that open Above and Below the 5 EMA lines. If a candle opens above the 5 EMA High (the top EMA), then place a sell. If the candle opens below the 5 EMA Low (the bottom EMA), then place a buy.

As you can see, the 5 EMA High is marked in gold, and the 5 EMA Low is indicated in magenta. The trade opportunities according to the strategy are indicated by the blue marks. Note that not all the trade opportunities are highlighted, and that a few of the trades would have resulted in a small loss. This is typical of a scalping strategy. This is where trade volume comes into play. The majority of the trades taken on the chart would have been winning trades, and as a result, the scalper would have closed the day with a profit.

This profitable forex trading strategy can be seen as a classic go to strategy for day traders. It is usually one of the first strategies and most simple strategies that Forex traders learn. For this version of the moving average cross we will be using three moving averages on the hour chart.

Again, we are looking at the USD/JPY H1 chart. As you can see the market made a sloppy cross over but this formed while the market was moving in a range. Therefore this signal has to be ignored. Using this strategy, any signals formed in a range formation can be dangerous to follow. They are not as reliable as signals formed in trends. The range broke, and the fast 20 MA crossed UP strongly over the slow 60 MA. The strong upward movement that followed is further indicated by the yellow arrow.

It is therefore essential that any profitable forex strategy tailored to this type of trading be based on the support and resistance levels that price action creates, so that you can determine where the market will probably change trend direction, or retrace.

Like the above picture suggests this type of swing trading uses the 20 SMA line to determine the trade, and the Relative Strength Index (RSI) is used to measure the strength of the trend. It is noted that this type of system (like most swing trading systems) work best in a trending market. Also, unlike the typical swing trading strategy, it works very well on both the 4H and Day charts.

As you can see with this chart, the areas circled in orange are viable buys that we identified with this strategy. Each of them would have rewarded about three times the risk that it took to make the trade, had we placed the buys.

Because forex markets cover the entire world, it's possible to trade forex 24 hours a day from Sunday evening through Friday afternoon. In the U.S., you can begin trading when Australian and Asian markets open on Sunday at 5 p.m. ET and continue trading as other markets open and close through Friday at 4 p.m. ET.

Stocks offer a greater variety of options and risk levels than forex trading, but they require much more capital to get started. Forex also allows trading 24 hours a day, while stock trading times are more limited. You can make money (or lose money) in any market, so what's most important is to know your particular market and how to trade effectively. 59ce067264

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