There are many advanced forex trading methods in the world, like technical analysis or fundamental analysis.
The most profitable Forex trading strategy should allow traders to learn how to trade forex successfully with proper trade management techniques.
Forex trading strategies require several factors to create a profitable strategy.
Every new and experienced trader has his unique trading goals and mindset that needs to be considered when selecting the most successful forex trading strategy.
It is often impossible to identify the best forex trading strategy as it depends on the traders’ personality.
One strategy might be useful for a trader that might not work for another.
Therefore, profit relies on how traders are implementing strategies and how a trader is managing his trade.
Importance of Having a Forex Trading Strategy
To start trading forex, you need to have a strategy that outfits your personality.
We should understand the reason for having a trading strategy.
Moreover, you should understand what strengths and weaknesses of your FX strategy.
There are mainly two types of forex strategies that work: speculation and hedging.
Speculation is used to predict a move by analyzing the market.
Any prediction about thinking improves trading results.
However, you should remember that there are differences between gambling and probability-based strategy.
In the forex market, most of the traders lose money due to not having a trading strategy.
Every trader starts thinking that you would be a millionaire overnight.
So at first, you should begin with scalping strategies.
Then, you will find that you can make a steady outcome from scalping, then you can move to day trading or swing trading.
21 Advanced Forex Trading Strategies
We did extensive research from many currency trading strategies in the world.
However, all forex strategies are the best for anyone.
Some strategies require a level of investment that a retail trader can not afford.
Therefore, retail traders should use a trading strategy that reflects institutional traders’ activity.
The retail traders’ impact is minimal in the forex market compared to institutional traders.
Therefore, the only way to make a profit for a retail trader is to follow the footprints of big boys.
Now it is your duty to study all the forex trading strategies explained here and identify the right one. You need to know about most of the strategies to pick the best forex strategy for you.
Here is the list of 21 advanced forex trading strategies:
- Price Action Trading Strategy
- Scalping Trading Strategy
- Day trading Strategy
- The Forex Secret Exclusive Trading Strategy
- Swing Trading Strategy
- Correlation Trading Strategy
- Candlestick Trading Strategy
- Trend Trading Strategy
- Fibonacci Trading Strategy
- Compounding Strategy
- ZigZag Trading Strategy
- Wave trading Strategy
- Ichimoku Cloud Trading Strategy
- RSI Based Trading Strategy
- Pivot Point Trading Strategy
- Moving Average Trading Strategy
- Bollinger Band Trading Strategy
- Range Trading Strategy
- Breakout Trading Strategy
- Pattern Trading Strategy
- Oscillators Trading strategy
Let’s have a look in detail. For reading broadly, click on the title of each strategy.
If you are serious about trading and want to make it a career, there is no alternative to using price action in your trading strategy. However, it would be pretty confusing to see price action for the beginning traders.
You can get the overall idea about the price action trading from this section, that may help you build your own trading strategy.
For beginner traders, price action trading means the simple concept of selling from the resistance and buying from the support. Many professional traders use these concepts and make massive money from the financial market.
There are three types of forex trading systems for new traders as a part of price action.
For example, when the price is within a range, traders can use the concept of sell from resistance and buying from the support to make the maximum benefit.
On the other hand, when the market is heading with a strong bearish trend, any break of the support might make it as a resistance. Therefore it will be an opportunity to sell from their resistance as a continuation of the bearish trend.
The same thing applies to the bullish market as well. If the market moves within a robust bullish trend, any break of the resistance might make it support.
The above image shows an example on how price action trading works. Here dynamic 20 EMA is working as a dynamic support and resistance, besides static levels. Once these levels are broken, we can expect a massive movement in either direction.
It is the forex trading method to earn a quick profit from the market from the difference between speed and ask price.
The concept of marketing is that it allows a trader to make money without putting so much effort into the market.
Here new traders might find it very easy as he does not have much knowledge about the market.
Scalping trading strategy required less time to see the outcome software to the intraday for swing trading.
On the other hand, scalping trading strategy is not for those who may try to multiply their account three to four times within a short period.
However, one thing that should be kept in mind that the forex market is the place where people can earn money with slow growth.
The forex market is not a money-making machine, and it will not allow its reader to be precious very quickly.
It requires patience and consistency that most of the successful traders have.
Is scalping trading allows a trader to earn a quick profit; it does not mean they can make our profit every day for every trade setup will go to the benefit?
A lot of trading strategies available such as scalping that starts from 1 minute to 1-hour chart.
Day trading means opening trades and closing them within the trading session or day. The main approach of this forex trading plan is to make sure that no trading position is open overnight. Therefore, if you are serious about trading and have a plan to move on full-time trading, the day trading method is perfect for you.
As a day trader, you have to set trading hours and make money on that time. Therefore, you don’t have to allow other people to control your life and time. Do trading whenever you want, grow capital and get the result within the sunset.
Pretty amazing, right!
Anyways, day trading doesn’t mean that you will make profits everyday. Moreover, the intraday volatility and false breaks often makes day trading harder for trades. Therefore, if you follow strong money management rules, you minimize some risks.
Trading session is an important element for forex day trading strategies. The forex market is open 24/5, it doesn’t mean you should trade any time. During the London and New York session, most of the banks and financial institutes remain open that allow trading fruitful.
This trading strategy is based on market context and fundamental aspects of the market.
It indicates accurately how the big players are moving the market and what they might do soon.
As we know, the forex market is the world’s biggest financial market.
It is not possible for retail traders to influence the price movement as the volume from retail investors as a whole is tiny compared to big investors.
So whatever the trading strategy a retail trader uses, he should know how it is implementing the big investors’ psychology in the market.
The Forex Secret Exclusive Trading Strategy is based on the emotion of big investors in the market.
Therefore, it can provide maximum profitable trades with high accuracy.
Swing trading is a method where traders should enter a trade from the swing low or swing high and get the maximum benefit from a swing. It is possible if the trader is ready to hold the trade for more than 1 day or longer.
Swing trading is one of the best forex trading strategies for beginners. Especially, perfect for those who have other works besides forex trading, like students, businessmen, service holders, and entrepreneurs. It is not bad to catch the maximum juice from a single swing with a minimum risk.
Swing trading identifies the “swings” in a medium-term trend to enter only on a high probability setup. For instance, in an uptrend, traders usually buy “swing lows.” On the other hand, in a downtrend, traders need to promote “swing highs.”
In swing trading, you have to focus on fundamental factors and do trading analysis on daily timeframe or higher. Moreover, to get the precise trading entry, you shift to a lower timeframe and intraday chart.
There are many forex trading techniques in the world and correlation trading is one of them.
In the forex market, there are some currency pairs who are correlated to each other.
Therefore, when one currency makes a movement, other currencies follow.
In that sense, we may see both EURUSD and GBPUSD fall at the same time.
Another example of a correlated pair is the AUDUSD and NZDUSD.
Traders should understand the logic behind the movement to get through the correlation.
In the GBPUSD and EURUSD pair, the movement might be due to the news from the US dollar.
In that case the both pairs will face the same direction.
On the other hand, if the movement in GBPUSD happens for the GBP only this momentum might not be similar to the EURUSD.
Then again, we can apply this trading forex trading for expanding our portfolio.
If you can buy 1 lot of EURUSD and 1 lot of GBPUSD instead of 2 lots of EURUSD, you can diversify your portfolio to mitigate the business risk.
Candlesticks are widespread currency chart types that can be utilized by Forex traders.
There are different forms of charts besides the candlestick chart, like line charts and bar charts.
However, they don’t reflect much about past movement.
The candlestick chart supplies the most accurate price movements based on technical analysis methods.
So, a trader can make trades based on the reaction of price within the past.
Candlesticks are available from 1 minute to every week or a month.
It is a handy tool for indicating opportunities for trading positions and exits.
There are many traders’ who choose this system.
This system works perfectly throughout times of volatility or non-volatile instances if trades use one or extra other indicators alongside support and resistance within the chart.
Additionally, some candle formations with a combination of 2 or 3 candles work as a reversal price signal like two bars, pin bars, or engulfing.
Moreover, there are also many chart patterns like flag pattern, bat pattern head, and shoulder, which might be formed with several candlesticks inside the chart to point to an exact trading position.
The idea of the trend trading approach is to follow trends behind it’s far selecting a top or a bottom.
This trading strategy involves figuring out the currency pairs, which might be trending both bullish or bearish to take the positions.
For a bullish structure, any buy entries will work properly than any selling trades.
The subsequent step is to find trading entries by using an indicator.
Several trading indicators are to be had within the trading chart.
You just have to find an appropriate one.
There are numerous custom indicators to be had, and you can make your indicator as nicely.
For example, RSI is a popular trend indicator that moves from 0 to 100.
The indicator levels point to the strength of the movement of a currency pair.
If the RSI is above 70 levels, it is a potential selling opportunity, and below 30 is a buying possibility.
It is one of the most successful trading strategies.
This effective trading strategy takes into consideration as a medium or long term method.
It used to follow essential areas, and it requires higher time frames in the chart.
As we know, the market follows the Fibonacci nicely while the marketplace is trending.
The basic concept behind his forex trading idea is to take buy and bearish entries on a fib retracement level.
When the price moves in the Fibo patterns, traders may find support levels at 0.328, 0.50, or 0.618 retracement levels.
Many traders use the Fibonacci trading method along with institutional traders.
However, it needs to be stated that this system needs much practice to grab.
The compounding trading strategy is a way to expand your profit to get the maximum benefit from the market.
For example, let’s say EURUSD is moving up and you want to take a benefit from the buying pressure, compounding strategy may allow it to achieve it. Forex compounding strategy is a method to get more profit than usual by adding more position when the market sentiment is towards your desired direction.
The financial market is very volatile, where traders have to face a lot of uncertainties. Therefore, getting more benefit from the positive market sentiment is important to boost your balance. If you can attach the compounding trading strategy in your personal trading method, you can earn more than usual.
There is some time in the forex market where there is nothing to do rather than watching the market and observing the possible opportunity. However, when the opportunity comes it’s your time to take the benefit from it and by using compounding strategy.
The compounding strategy is perfect when the global economic condition is suitable for investors. Because it requires a stable movement by creating price swings, which is not applicable when the market is going through a lot of uncertainty.
ZigZag is a trading indicator that helps to understand the price swing. Although it is a lagging indicator, you can use it as a secondary confirmation of your strategy. ZigZag follows the fractal theory strongly and investors can easily predict the price using it. However, investors should use other trading tools as a trading confirmation.
There are Zigzag parameters, which you need to determine out:
- Depth – it indicates how far returned in the bar series may look. to achieve the highs and lows means you have enough “depth.”
- Deviation – how many in charge alternate it may take to alter the trendline from positive to negative.
Although you have the basic concept of a ZigZag indicator, there are some other tools that you should use. The global financial market is very uncertain where using a system with a higher accuracy is important. In that case, using other confirmations like from price action or higher timeframe is important.
Moreover, the following conditions are also important while doing Zig Zag trading:
- Rate symmetry has to come up with a pleasing and uniformly healthy wave harmonics, precisely the AB=CD pattern.
- The depth of the wave, which ought to give you a terrific intensity of waves from swing highs and lows.
- The entry position, which has to make sure that you can predict a trend.
Overall, Zig Zag is a profitable indicator that helps traders on Swing trading on position trading. Although it is a lagging indicator and available for free in most trading platforms. You cannot use this indicator as supreme trading tools. The most profitable way of this tool is to use it besides other indicators.
The Elliott wave method is much like a trend following approach.
Just like the MACD trend Following strategy – easy to learn trading approach.
Or any other famous plan, the way to make the most of trading Pullbacks.
Even though the Elliott Wave trading strategy is a trend trading method, we will spot Elliott Wave entry factors on the lower time frames.
That is because this idea may be carried out in all time frames.
Therefore, it is a typical trading approach.
Elliott Wave’s idea will require looking for a sample of 5 consecutive waves before creating a trading choice.
Elliott Wave’s concept begins by identifying two different sorts of waves.
- Impulsive waves follow the identical path as the overall trend supportive.
- Corrective waves, on the contrary, circulate in opposition to the general trend. Those waves occur in a sequence of five.
- Elliott Wave will require seeking out a pattern of five waves earlier than making a trading selection.
The Elliott Wave strategy wishes to meet and abide by a few strict rules if you want to validate the five-wave pass.
The three simple rules.
- Wave 2 in no way retraces extra than 100% of Wave 1. The retracement is between 50% and sixty-one .8% of wave 1.
- Wave four in no way retraces greater than one hundred% of wave 3. Usually, it declines among 38.2% to 50% of wave 3.
- Wave 3 regularly travels beyond the stop of wave one, and it’s by no means the shortest one; Wave 3 will typically extend 161.8 x wave 1.
Our favorite manner of playing the Elliott Wave approach is to permit the first 4 wave actions to unfold.
Then you need to locate top Elliott Wave entry points close to the stop of wave four.
That is in an attempt to capture the closing wave of the whole 5 Elliott Wave series.
Earlier than we outline a way to exchange Elliott Wave, it’s essential to spotlight other key crucial Elliott Wave strategy suggestions:
If wave three is the most extended leg, then wave five will more or less equal to wave 1.
Waves 2 and 4 will change.
If wave 2 has a sharp correction or shake, four is a flat correction.
After completing the five Elliott Wave, the ABC corrective waves typically stop in the vicinity of wave four low factors.
The Ichimoku Cloud is a collection of indicators to identify possible support and resistance zones and momentum with the possible trend direction.
It takes multiple moving averages and plots them on the chart.
It uses these lines to identify a “cloud” to anticipate where the price may face support or resistance.
The Ichimoku cloud was created by Goichi Hosoda, a journalist from Japan.
Therefore, it was published in the late 1960s.
The Ichimoku cloud provides data points rather than the standard candlestick chart.
It seems complicated at first, but those who are familiar with charts would find it easy to understand.
- Ichimoku Cloud is a combination of 5 lines, of which are clouds where the difference between the two traces is shaded in
- The lines consist of a nine-period average, a 26-period average, a mean of these two averages, a fifty two-duration average, and a lagging final fee line.
- The Cloud works as a fundamental part of the indicator. While the charge is under the Cloud, the overall market trend is down. While price moves above the Cloud, it indicates that the trend is up.
- The above trend indicators are bolstered if the Cloud is transferring inside the same course as a charge. For example, in an uptrend, the top portion of Cloud moves up, or in the direction of a downtrend, the lowest of the Cloud moves down.
The RSI is a technical analysis tool that comes from the oscillator family.
This trading indicator is a leading indicator that provides signals on the chart.
The decisive characteristic of this indicator is that it can eliminate early signs for trades.
However, the demerit is that many signals can appear to be false.
So, the RSI should be used with a combination of other forex trading tools to increase the probability.
In the following section, we will discuss the RSI indicator and how we can use it in the forex trading strategy.
This trading indicator was developed by an American engineer named J. Welles Wilder.
It usually attaches to the bottom of the chart in a separate horizontal window.
The RSI indicator consists of a single line that fluctuates between 0-100 zones.
The area is divided into three zones:
- Oversold Area: 0-30 levels
- Neutral area: 30-70 levels
- Overbought zone: 70-100 levels
The RSI line moves within these three areas and creates different trading signals.
Moving average of Volume on Longer timeframe/ Longer Period moving a mean of Volume * 100
The basis of pivot points trading strategy in the forex market is to use this trading indicator in a range of currency pairs.
In pivot point, there is a support and resistance level that can provide a reliable price direction both in the continuation and reversal pattern.
Moreover, pivot points work as an influential strategy in the currency pair.
The formula of Pivot point calculation:
Pivot Point on a specific timeframe =
(High of the previous candle + Low of the last candle + Close of the last candle)/ 3
The pivot point works as an equilibrium point where the supply and demand for a currency pair is almost the same.
In a long trend, if the price comes back to the equilibrium point and gets rejected it will indicate that the price will continue the current momentum.
On the other hand, you can trade breakout pullback and continuation basis trade setup using the pivot point indicators.
The average is the average price movement of the previous number of candles. 20 moving average means the average price of the last 20 candles.
Moving averages work well in all time frames from one minute to one month.
Types of moving average that are used by most of the traders.
Simple moving average and exponential moving average.
Let’s have a look at a glimpse of these.
A trading strategy is a systematic approach that is mandatory for a trader to gain a sustainable growth of his account.
However, there are many other things to know before joining the forex market regarding the importance of trading strategy.
- Simple moving average: it calculates the arithmetic meaning of a financial instrument over several periods.
- Exponential moving average: it is a complex measurement of the moving average. To calculate the exponential moving average, you first need to calculate the moving average then multiply with the weighting average.
A combination of the 200 moving average and 20 days moving average is a good trend following strategy.
If the price is below both of the candles, your intention should be the sale.
On the other hand, if the price is above the 200-day moving averages, your purpose is to buy only.
For taking entry, you can follow your trading strategy, and you can match them with the current market trend.
For example, let’s say, your trading strategy combines with the RSI and Bollinger band, and both are showing a sell signal.
Moreover, 200 moving average and 20 daily moving average also indicates the selling trend.
Therefore, it is likely that your possibility to hit the take profit will increase.
Bollinger Bands are a sort of technical indicator that has been widely used in various markets, such as stocks, futures and currencies. In the 1980s, Bollinger Bands were developed by John Bollinger, which granted exceptional insights between price and volatility.
Along with this, you can use Bollinger Bands to identify the overbought and oversold levels, which may help you as a trend following instrument and also finding breakouts.
- Bollinger Bands indicator can help to find entry and exit points.
- Bollinger Bands often shows overbought and oversold situations of the market.
- Both professional and retail traders widely use Bollinger Bands.
- Only using the Bollinger Bands is a little bit risky because of its focus on price and volatility.
To assess the SMA (Simple Moving Average) of the security is referred to, commonly utilising a 20-day SMA. It is the initial phase in calculating the Bollinger bands. As the first data point, a 20-day moving average would be averaging out the closing prices for the initial 20 days. The following data point would drop the foremost price, add the price on day 21 and take the average, etc. The standard deviation of the security’s price will be gotten after that. Standard deviation is a numerical estimation of average features and differences conspicuously in finance, economics, statistics, and accounting.
A range-bound market is a marketplace where price bounces in between a particularly low and a high level.
The high price in a range market is called resistance that works as a possible reversal zone.
On the opposite hand, the low fee in a selected market is known as an aid that draws the buyers to take buy positions.
Overall, the marketplace movement might be labeled as corrective or sideways.
The range-bound foreign exchange market seems to like the below-noted chart.
The marketplace can remain sideways for weeks or even months.
Moreover, the sideways market suggests the indecision for geopolitical problems by the market participants.
There are a lot of central banks, prominent financial institutes, hedge funds that operate the business activity with millions of dollars.
They usually spend a lot of money on studying the market.
Therefore, they input a position with numerous affirmations.
They typically don’t take any hazard to their investment, so that they wait on positive market sentiments, as of the absence of market movers, the ranged market forms.
Within the ranged forex marketplace, traders may try to take long positions as quickly as the rate reaches the help stage and take shorts while the fee reaches the resistance.
In a perfect market condition, sellers sell from the high, and buyers buy from the low.
Therefore, the supply and demand changes with a light market condition.
However, this perfect market condition does not continue in the long run.
There are some situations where the market got a breakthrough from the support and resistance levels with massive power.
It is called a breakout.
Breakout trading is perfect when it can create panic among buyers or sellers.
In most cases, the market does not want to get through a breakout until there is a strong reason.
It happens very rarely in the market.
In most cases, the market comes back to the point where it started to break.
To get yourself into breakout trading in forex, you should wait for the price to break any support and resistance levels with massive speed and at least a session close for intraday and daily close for swing trading.
Therefore, you should wait for the price to come back to the level again with correction.
After the market rejects the level with an appropriate candlestick pattern, the momentum may continue to the direction of the breakout.
Chart pattern is a price action tool that is created with some trendline and horizontal line.
This trading strategy is the integrated part of price action trading.
If we see the past performance of this trading strategy, we would see a long history of providing profitable trades in every financial trading instrument.
The price pattern that indicates the reversal of price is known as the reversal pattern.
On the other hand, it can work as a major market reversal pattern to indicate the trend reversal or a minor reversal pattern to indicate the continuation pattern towards the trend.
Overall, chart patterns are a great strategy to make money from any financial market like forex, cryptocurrency, indices, stocks and commodities.
Chart pattern offers the graphical illustration of traders’ interest in the market. Besides, they display the relative strength of some important price levels.
There are many patterns that the trader makes use of in the forex marketplace.
Oscillators move with the price with the same price direction. However, when a discrepancy happens Oscillators and price may change their direction, by forming a divergence. In MACD there are two types of divergence- regular divergence and hidden divergence.
Hidden divergence happens with the price and MACD Histogram and shows a minor correction to the price. On the other hand, Regular divergence happens with the MACD line and indicates a major price reversal.
According to price action, we buy from support and sell from resistance but it does not happen every time. Because no one can say whether the price will rebound or not. Therefore, we should use other indicators like Oscillators to increase the trading possibility.
Among Oscillators RSI is important. When the RSI level moves below 30 level, it is an oversold position. Moreover, if the RSI moved above 70 level, it is an oversold situation. Overall, if other conditions meet, we can use RSI as a reliable trading tool.
Let’s see another example of Oscillator from MACD. MACD or Moving Average Convergence and Divergence is a trading indicator that moves with the signal line and Histogram, vertical lines. When the Hostgram moves above the zero line, the market sentiment is bullish. On the other hand, if it moves below the zero line, the sentiment changes to bearish.
The above image shows what the MACD looks like. We can build a trading strategy by observing the Histogram and signal lines by finding the price reversal point. The hidden divergence indicates a minor correction to the price. On the other hand, the hidden divergence works as an important price reversal point, depending on other confirmations.
There are many successful forex trading strategies, and a trader should pick the most profitable one for his from these.
As we know, forex trading involves a risk of trial and error, so you should practice several strategies to identify the most profitable one for you.
The scalping strategy requires a lot of time in the chart, which is not suitable for part-time traders.
The most profitable forex strategy relies on how you are implementing it on your chart.
Moreover, besides choosing the best trading strategy, it is critical to perform in the chart with appropriate money management rules.
Furthermore, having good trading psychology is the key to remain unbeaten in the industry.