There are many Forex trading strategies in the world that a trader can follow. However, identifying the most profitable Forex trading strategy is essential. Every trader has his unique trading goals and mindset that needs to be considered when selecting the most profitable Forex trading strategy.
It is often impossible to identify the most profitable Forex trading strategy as it depends on the traders’ personality. profit depends on how a trader is implementing the strategy in his trading chart and how a trader is managing his trade. For scalping, a trader needs to monitor the price the whole day and wait for the perfect chart time to come up.
Moreover, Some institutional strategies require a bigger investment that a retail trader cannot afford. Therefore, retail traders should use a trading strategy that reflects institutional traders’ activity. The impact of retail traders is very tiny in the Forex market compared to the institutional traders. Therefore, the only way to make a profit for a retail trader is to follow the footprints of big boys.
There are a lot of trading strategies and your duty to identify the right one. You need to know about most of the strategies to pick the profitable one for you.
Here is the list of mostly used Forex trading strategy
- Scalping Trading Strategy
- Candlestick Trading Strategy
- Support & Resistance Trading Strategy
Among the trading strategy, we will discuss the scalping in detail and we will take you to the beauty of Forex trading by an exclusive scalping trading strategy using the moving averages.
Before that, let’s have a look a depth insight about the scalping trading strategy to determine why you should choose it
What is Scalping Trading Strategy?
Scalping is an effective forex trading strategy, particularly where new traders have involved it as a low-risk method. The beauty of forex trading is that you don’t have to wait for days to reach the price on your desired level.
However, scalping requires a strong mindset to make attractive earnings. Scalping is a trading method that makes a specialty of making profits on small price changes as soon as the price has emerged as profitable. Scalping reaches consequences with the aid of growing the variety of winning trades by sacrificing the size of the wins.
There are many scalping strategies that work nicely from the 1-minute chart to one hourly chart. Mostly the profit of 10 pips to 100 pips is considered as a scalping strategy.
The scalping trading strategy requires a strict exit method to avoid big losses that may get rid of the numerous small gains. Overall, scalping calls for a wonderful quantity of endurance but it could be distinctly effective.
Is Scalping profitable?
Definitely profitable if you know the market context well. Moreover, if you are a full-time forex trader with an experience of more than a year this trading method might be profitable for you. However, it depends on how you are implementing the trading rules.
If you ever tried to trade in the foreign exchange market you probably heard the name of moving averages. It is basically the average price of the last few candles.
What does it mean by a few candles?
50 moving average is the average price of the last 50 candles while 20 moving average is the average price of the last 20 candles.
Popular Moving Average Scalping Strategy
Forex Scalping Trading System With Moving Average is a strategy that is suitable for all beginner traders when the market is trending.
For this strategy, you need two moving averages. The first one is 200 exponential moving average and the final one is the 5-period moving average.
The decision of trading a currency pair depends on the crossing over of these two different moving averages.
#1 Set Up Your Chart
For this scalping method, you need to identify the trend. Make sure to take sell entries only when the trend is bearish. On the other hand, take buy entries only when the trend is bullish.
Then set the MT4 template with the below-mentioned indicators:
- The Exponential moving average close period of 200.
- The simple moving average applied to close period 20.
- Timeframes: 5-minute chart.
- Chart type- Candlestick.
#2 Trading Session and Currency Pair
As we know the forex market is open 24/7 but it is not likely to trade every day and every time frame. Therefore, make sure to use this scalping strategy only on the London and New York session as this time real investors and banks are open.
The preferred currency pairs are EURSUD, GBPUSD, USDJPY, AUDUSD, and USDCHF. We will ignore cross and exotic pairs as they require a lot of spread and low liquidity.
The chart below shows a trading example of this Forex Scalping System with moving averages.
#3 Taking the Buy Entry
The buy entry for this scalping system is very simple:
- Find the direction to determine the trend is bullish.
- Buy when 20 SMA crosses the 200 EMA on the upside.
- place your stop loss below the recent swing or near term support level.
- Set your take profit at 20 pips or next near term resistance level.
#4 Taking the Sell Entry
The Sell entry for this scalping system is simple like the buy entries:
- Find the direction to determine the trend is bearish.
- Sell when 20 SMA crosses the 200 EMA on the upside.
- place your stop loss above the recent swing or near term resistance level.
- Set your take profit at 20 pips or next near term support level.
One this is very important to remember that the forex market is a decentralized market. Therefore, no one can control this market. Therefore, you should make strong money management to avoid the unexpected move.
The main aim of a forex trader is to keep the overall equity safe. Therefore, take only those traders that have a minimum of 1:2 risk: rewards only. If you make any loss do not try to recover it at that time. During the volatile condition, the market may move in your direction after hitting your stop loss.