trade options
promotions

Share
Go down
gandra
gandra
Global Moderator
Number of messages : 3612
Points : 8848
Date of Entry : 2013-01-13
Year : 49
Residence Country : Serbia
https://www.mql5.com/en/users/drgandrahttps://www.fxjunction.com/profile/gandra/account/I

ma1 The Basic Forex Trading Strategy

on Mon Mar 30, 2015 6:40 pm
The basic Forex strategy that is used by many traders of all experience levels, is Trend Following. This strategy is widely followed because of its simplicity to identify and trade and many times, strong trends can bail you out of an imperfect set of buy and sell rules.



A popular trading express is “the trend is your friend.” This expression has stood the test of time because many traders find it to be a critical building block of a trading plan. Before we delve into the basics of Trend Following, it is important to first explain why trend trading is a popular strategy used by many new and experienced traders.

Do you have the perfect Forex trading strategy? I have not found it. To me, a perfect strategy is the one that wins all of the time and has minimal trade drawdown. I hate to burst your bubble but a 100% win ratio strategy does not exist.

Therefore, learning how to trade in an imperfect world is very important. Trend following is a simple way to cover up some strategy imperfections by identifying the strongest trends in the market.
For example, if the market is moving up in a strong trend, it isn’t as important what the strategy is used to time entries, you simply need to be buying. When you trade in the direction of the trend, the rest of your trading approach can fall right into place. This doesn't mean that all your trades will be winners. It does mean that you don't have to be exact in your entries and exits once you find a strong trend to trade.



Now how do you know when a trend starts and when it is going to end? this is the $64,000 question. Since this is a beginners guide I will not elaborate on the various techniques that traders use to identify trends. I will however touch on several techniques in later chapters but note that these will be just in an introduction level without going too much deeper.

Any trader either a newbie or a pro should develop his own style of trading. There are several trading styles that you can adopt. You will choose your style based on your personality and financial capacities.
Many traders make the mistake of adopting a trading style that is unnatural for them. A trader may adopt one of the following two main trading styles: Day Trading and Intraweek trading.


Last edited by gandra on Tue Mar 31, 2015 8:53 pm; edited 1 time in total
gandra
gandra
Global Moderator
Number of messages : 3612
Points : 8848
Date of Entry : 2013-01-13
Year : 49
Residence Country : Serbia
https://www.mql5.com/en/users/drgandrahttps://www.fxjunction.com/profile/gandra/account/I

ma1 Day Trading

on Mon Mar 30, 2015 6:43 pm
Day trading on Forex means that one or few trades are conducted within one trading day. As a rule, the time intervals between the opening or the closing of trades may take from several minutes up to several hours.

Despite some difficulties of day-trading, this type of trading is very popular among the newcomers as well as among experienced traders. Day trading allows for the opportunity to make a profit in a short time with a small amount of funds.

In order to achieve favorable results in an intraday trading it is essential that you make the right forecast as to the price movement, as there are many external factors that cause high volatility in the currency market. So to make your day trading beneficial you have to track the market situation, collate facts and make conclusions about the price behavior of currencies, it is also important to be able to react fast so that you will find entry and exit points quickly at the opening or the closing of trades. Combining knowledge of technical analysis  with patience and observance a trader has good chances to earn well with a relatively low risk.



There are several strategies of day trading. The most widespread among them is Scalping - a strategy that is offering a fast opening or closing of several day positions. The trader closes trades while making just a few profit pips on each trade while the earnings come from the accumulation of a large number of successfully completed short term trades.

Another popular day trading strategy is news trading. Traders, who choose news trading, monitor the market events permanently, analyze the currencies behavior in different cases. Usually news trading requires an insight learning of market development and a proper trade experience accumulation.
Day trading can be a source of a nice income through the readiness to devote most of your free time to trading.

Now here are the advantages and disadvantages of day trading.

Advantages:
* doesn't require large sums of money;
* Trader may stop trading at any time;
* Minimal risk.


Disadvantages:
* High emotional pressure;
* Lack of time during a trading session.

This style is suitable for traders with endurance and quick reactions.


Last edited by gandra on Tue Mar 31, 2015 8:56 pm; edited 1 time in total
gandra
gandra
Global Moderator
Number of messages : 3612
Points : 8848
Date of Entry : 2013-01-13
Year : 49
Residence Country : Serbia
https://www.mql5.com/en/users/drgandrahttps://www.fxjunction.com/profile/gandra/account/I

ma1 Intraweek Trading

on Mon Mar 30, 2015 6:58 pm
Intraweek trade has no such furious market movements as in intraday trade. It may seem that the market is motionless. But it is just at the first sight. Intraweek trading has the following characteristics:
* A trade can remain opened for ten days;
* All trades are counted on taking the most part of profit on market movement;
* As a rule, not more than 2 positions are opened during a week;
* Requirements for invested funds are usualy higher than for intraday trading;
* The work time is multi-hour charts.
Intraweek pros and cons
Pros:
* Not too much pressure;
* High profitability;
* There is free time during a trading session.
Cons:
* larger volume of funds is required;
* Trader may be outside the market during a trend correction;
* Impossibility to stop trading at any moment;
* Necessity to hold opened position for 24 hours.

Probably, every trader can find additional styles, but the two that we've mentioned here are probably the most common.
gandra
gandra
Global Moderator
Number of messages : 3612
Points : 8848
Date of Entry : 2013-01-13
Year : 49
Residence Country : Serbia
https://www.mql5.com/en/users/drgandrahttps://www.fxjunction.com/profile/gandra/account/I

ma1 Forex Strategy Entry and Exit Signals

on Tue Mar 31, 2015 10:17 pm
The Forex strategies featured here are based on technical analyses. This guide is intended to serve as a primer and a starting point. To take full advantage of these strategies you need a level of technical analysis knowledge that is beyond the scope of this guide. However, you can easily find information online to complement your knowledge. Once you want to apply any of the strategies listed here simply run a Google search using the title of the strategy as the search term and you'll find plenty of information that will allow you to obtain the knowledge you need to put that strategy into effect. .

The Moving Averages Strategy





Moving averages gives you a hint as to the direction of the market, this is useful in identifying a trend. A trend is a good entry signal. A disadvantage of moving averages is that they tend to leg the market thus you need to use short period moving averages, such as a 5- or 6-day moving average, to reflect the current price action.
Moving averages are the most basic and most utilized technical indicator. They are used for smoothing the price movement. Moving averages are used as a trend line which adapts to price changes, not just as a regular trend line.
The Moving Averages strategy gives you the following signals:

  • If the closing price moves above the moving average - this is a buy signal.
  • If the closing price dips below the moving average - this a sell signal.


The Crossover of Moving Averages Strategy





Crossover of Moving Averages is another strategy that can help you identify a trend. This comprises of two moving averages: a “fast” moving average (e.g. 10 bars) and a “slow” moving average (e.g. 15 bars). The slow-moving average needs to use a larger amount of days than the fast one.
A crossover is regarded as a basic form of signal and is preferred amongst numerous investors since it eliminates all emotion. The standard kind of crossover is when the price of an asset moves from one side of a moving average and closes on the other.
Price crossovers are employed by investors to spot changes in momentum and can be used as a simple entry strategy. A close above a moving average from below may suggest the beginning of a new uptrend.
The Crossover of Moving Averages Strategy gives you the following signals:

  • When the fast-moving average crosses the slow moving average from below - that's a buy signal.
  • When the fast moving average crosses the slow moving average from above - that's a sell signal.


Here's a sample of moving averages crossover:
[You must be registered and logged in to see this image.]

The Turtle Trading Strategy




The Turtle Trading strategy is quite popular among many traders, search the internet for explanations as to how to make full use of it. In essence, the turtles evaluate the high and the low over the past 20 days.
The Turtle Trading Strategy gives you the following signals:

  • When the current prices move higher than the high of the previous 20 bars - that's a buy signal.
  • When the current prices move lower than the low of the previous 20 bars - that's a sell signal.


The Moving Average Convergence Divergence Strategy (MACD)



The MACD strategy is another indicator that is useful in identifying trends. This indicator take advantage of the relationship between two moving averages of prices.
Most traders use the difference between a 26-bar exponential moving average (EMA) and the 12-bar. This difference is then plotted on the chart and oscillates above and below zero. A 9-bar EMA of the MACD, called the "signal line," is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.
The MACD strategy can be used in various ways, however the most popular is to use the signal line for entry signals as follows:

  • When the signal line crosses the MACD from below - that's a buy signal.
  • When the signal line crosses the MACD from above - That's a sell signal.


The Williams Percent Range Indicator Strategy (Williams %R)


The Williams %R strategy developed in 1966 by Larry Williams. Its purpose is to help identify overbought and oversold positions in the market.
This indicator is categorized as an “oscillator” because the values vary between zero and “-100”. The indicator chart usually has lines drawn at both the “-20” and “-80” values as alert signals. Values between “-80” and “-100” are interpreted as a strong oversold condition, or “selling” signal, and between “-20” and “0.0”, as a strong overbought condition, or “buying” signal.
The Williams %R strategy gives you the following signals:

  • When the indicator has a value above 80 - that's a sell signal. 
  • When the indicator has a value below 20 - that's a sell signal.


Relative Strength Index Strategy (RSI)


The Relative Strength Index strategy is yet another overbought/oversold signal. it was created by Welles Wilder.
The goal of the Relative Strength Index (RSI) is to determine the comparative changes that occur between the higher and the lower closing prices. The index is used by traders to determine overbought conditions and oversold conditions which then provides them with highly useful info to help establish entry points and exit points of the underlying asset. The RSI is an oscillator and its line ‘oscillates’ between the values of zero and one hundred. The values of 70 and 30 are viewed as significant values since above and below them are the overbought and oversold areas respectively. Just about any value above 84 is regarded as a very strong overbought situation and produces a ‘sell’ signal, while every value below 15 is regarded as quite a solid oversold situation and produces a ‘buy’ signal.
The Relative Strength Index Strategy gives you the following signals:

  • When the RSI crosses the 70-line, overbought-zone, from above - that's a sell signal.
  • When the RSI crosses the 30-line, oversold zone, from below- that's a buy signal.


The Bollinger Bands and Channels Strategy


"Bollinger Bands" incorporate a moving average and two standard deviations, one above the moving average and one below. The main thing to understand about Bollinger Bands is that they consist of up to 95% of the closing prices, according to the settings.
Trading Bollinger Bands can assist you to fully grasp a number of characteristics of an asset such as the high or low of the day, whether a currency is trending, as well as whether it is volatile or stable. Sometimes while trading Bollinger bands, you will notice the bands coiling really tightly which indicates the currency is trading in a narrow range.
"Bollinger Bands" incorporate a moving average and two standard deviations, one above the moving average and one below. The main thing to understand about Bollinger Bands is that they consist of up to 95% of the closing prices, according to the settings.
Trading Bollinger Bands can assist you to fully grasp a number of characteristics of an asset such as the high or low of the day, whether a currency is trending, as well as whether it is volatile or stable. Sometimes while trading Bollinger bands, you will notice the bands coiling really tightly which indicates the currency is trading in a narrow range.
[You must be registered and logged in to see this image.]

Trading the News Strategy


The market is influenced by news events and by learning how to take advantage of these events you can improve your profits and prevent expensive mistakes. Many beginner Forex traders come to recognize the significance of news events only after seeing a perfectly profitable trade becomes a loss in a few minutes, while skilled Forex traders foresee the move and add to their daily gains in a regular manner.
Economic news reports usually initiate solid short-term moves in the assets markets which could create trading opportunities for traders. Announcements about corporate profits, a change in management, rumors of a merger, are all events which could result in a corporate entity's share price to move significantly up or down. Interest rates, unemployment and export rates, or the central bank's policy changes, can lead to a serious change of an exchange rate.
So how can you trade this strategy? simply follow the news closely and act fast. A good news event is a buy signal while a bad news event is a sell signal.

A Few Trading Tips for Dessert


1. Before implementing any strategy you must check for any related news events. why? because news events may interfere with your strategy and distort the outcome that you are expecting. Bad news may cause an uptrend to swing down and good news may cause a downtrend to swing up. Before implementing any trade simply run an online search to make sure there are no adverse news events expected.

2. Different parts of the day coincide with different amounts of volatility in the market. For example, the afternoon, when no major announcements are expected, will be associated with less volatility than the morning hours. Thus, trade volatility (Range Out) before noon and stability (Range In) afternoon.

3. You can expect the market to get volatile and make large swings right after major market announcements such as interest rate announcements by the fed and job reports.

4. Have a trading plan and a strategy and always stick to them.

5. Take time to improve your technical analysis knowledge, this will help you to sharpen your strategies.

6. Control your emotions and never trade when you are tired or drunk, this may lead to irrational behavior and losses. Always trade while you are relaxed and focused.

7. While trading, your main concern should be limiting risk and protecting your capital. Develop a money management plan and stick to it, always!

8. Define your entry and exit points. This is a part of developing and following your trading plan. Don't trade without having a trading plan.
Sponsored content

ma1 Re: The Basic Forex Trading Strategy

Back to top
Permissions in this forum:
You cannot reply to topics in this forum