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Total posts 23573 Total topics 2744 Total members 16057 Our newest member lessieps1

Announcement

  • Join Date: Apr 2017
  • Posts: 3

Which is the best trading strategy?

  • Join Date: May 2013
  • Posts: 2844

Andrew's FX Propulsion strategy is a good one to start with. You can download the eBook by clicking here.

It also includes the momentum metre which shows the best currency pairs to trade at any given time.

Become one of our traders & earn a salary from the forex market!

  • 1 like

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  • Join Date: Apr 2017
  • Posts: 3
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  • Join Date: Jan 2017
  • Posts: 1

Comment

  • Join Date: Oct 2016
  • Posts: 6

I think you are going the wrong direction to look for THE BEST strategy. The best approach is to have a number of not correlated strategies (different markets, different timeframes, different appraoches) so that the result is not ver exposed to one single strategy. Markets go through phases and that way you have a better chance to have a less wild ride, particularly when a strategy goes through a "not nice quite drastic drawdown" wich happens.

If you look for the best, then this (i.e. a multi strategy portfolio) is as close to the holy grail as you can come.

Comment

  • Join Date: Apr 2017
  • Posts: 3

Comment

  • Join Date: May 2013
  • Posts: 2844

I think you are going the wrong direction to look for THE BEST strategy. The best approach is to have a number of not correlated strategies (different markets, different timeframes, different appraoches) so that the result is not ver exposed to one single strategy. Markets go through phases and that way you have a better chance to have a less wild ride, particularly when a strategy goes through a "not nice quite drastic drawdown" wich happens.

If you look for the best, then this (i.e. a multi strategy portfolio) is as close to the holy grail as you can come.

I'm not sure I agree. Finding one profitable strategy is difficult enough, let alone trying to run multiple strategies at the same time.

You're not going to make money all the time, this is just the nature of trading the markets which we all need to accept. In 2016 I went for almost 12 months without making money, but since the start of 2017 I'm up over $100,000.

The idea of plugging in different strategies to trade different market conditions is appealing, however how do you know when market conditions will change? It could be in 2 mins, or 2 years.

If you can find a strategy that does well during the good times (whenever that might be) and doesn't lose heavily when things change then you're onto a winner.

Trying to double guess when conditions are going to change is near impossible in my opinion.

Become one of our traders & earn a salary from the forex market!

Top 4 Things Successful Forex Traders Do

There is no single formula for success for trading in the financial markets. Think of the markets as being like the ocean and the trader as a surfer. Surfing requires talent, balance, patience, proper equipment and mindfulness of your surroundings. Would you go into water that had dangerous rip tides or was shark-infested? Hopefully not. (See also "The 3 Most Timeless Investment Principles.")

The attitude to trading in the forex markets is no different. By blending good analysis with effective implementation, your success rate will improve dramatically and, like many skill sets, good trading comes from a combination of talent and hard work. Here are the four strategies to serve you well in all markets, but in this article we will focus on the forex markets.

Approaching Forex Trading

Before you start to trade, recognize the value of proper preparation. It's important to align your personal goals and temperament with relatable instruments and markets. For example, if you understand retail markets, then it would make sense to trade retail stocks rather than oil futures, about which you may know nothing. It also helps to begin by assessing the following three components:

[ Given it's low commissions and fees, the forex market is very accessible to individual investors. However, before you start trading, make sure you have a solid understanding of what the forex market is and the smart ways to navigate it. Learn the basics and see real-time examples of the approaches and strategies detailed in this article Investopedia Academy's Forex Trading for Beginners course. ]

Timeframe

The timeframe indicates the type of trading that is appropriate for your temperament. Trading off a five-minute chart suggests that you are more comfortable taking a position without exposure to overnight risk. On the other hand, choosing weekly charts indicates a comfort with overnight risk and a willingness to see some days go contrary to your position.

In addition, decide if you have the time and willingness to sit in front of a screen all day or if you would prefer to do your research over the weekend and then make a trading decision for the week ahead based on your analysis. Remember that the opportunity to make substantial money in the forex markets requires time. Short-term scalping, by definition, means small profits or losses. In this case, you will have to trade more frequently. (See also "Forex Walkthrough.")

Methodology

Once you choose a timeframe, find a consistent methodology. For example, some traders like to buy support and sell resistance. Others prefer buying or selling breakouts. Yet others like to trade using indicators such as MACD (moving average convergence divergence) and crossovers.

Once you choose a system or methodology, test it to see if it works on a consistent basis and provides an edge. If your system is reliable more than 50% of the time, you should consider that an edge, even if it's a small one. It also helps to backtest your system and discover every time trading on a signal and your profits were more than your losses, although this method is not an entirely reliable indicator of future success. Test a few strategies, and when you find one that delivers a consistently positive outcome, stay with it and test it with a variety of instruments and various timeframes.

Market (Instrument)

You will find that certain instruments trade much more orderly than others. Erratic trading instruments make it difficult to produce a winning system. Therefore, it is necessary to test your system on multiple instruments to determine that your system's "personality" matches with the instrument being traded. For example, if you were trading the USD/JPY currency pair in the forex market, you may find that Fibonacci support and resistance levels are more reliable. (See also "Taking the Magic out of Fibonacci Numbers.")

Your Forex Trading Attitude

Behavior is an integral part of the trading process, and thus your attitude and mindset should reflect the following four attributes:

Patience

Once you know what to expect from your system, have the patience to wait for the price to reach the levels that your system indicates for either the point of entry or exit. If your system indicates an entry at a certain level but the market never reaches it, then move on to the next opportunity. There will always be another trade. (See also "Patience Is a Trader's Virtue.")

Discipline

Discipline is the ability to be patient to sit on your hands until your system triggers an action point. Sometimes, the price action won't reach your anticipated price point. At this time, you must have the discipline to believe in your system and not to second-guess it. Discipline is also the ability to pull the trigger when your system indicates to do so. This is especially true for stop losses.

Objectivity

Objectivity or "emotional detachment" also depends on the reliability of your system or methodology. If you have a system that provides entry and exit levels that you find reliable, you don't need to become emotional or allow yourself to be influenced by the opinion of pundits. Your system should be reliable enough so that you can be confident in acting on its signals. (See also "Trading Psychology and Discipline.")

Realistic Expectations

Even though the market can sometimes make a much bigger move than you anticipate, being realistic means that you cannot expect to invest $250 in your trading account and make $1,000 each trade. Although there is no such thing as a "safe" trading timeframe, a short-term mindset may involve smaller risks if the trader exercises discipline in picking trades. This is also known as the tradeoff between risk and reward.

Motivating Forex Trading Factors

Instruments trade differently depending on the major players and their intent. For example, hedge funds vary in strategy and are motivated differently than say, mutual funds. Large banks that are trading in the spot currency markets usually have a different objective than currency traders buying or selling futures contracts. If you can determine what motivates the large players, you can often align that knowledge to your advantage.

Alignment

Pick a few currencies, stocks or commodities and chart them all in a variety of timeframes. Then apply your particular methodology to all of them and see which timeframe and instrument aligns to your system. This is how you discover alignment within your system. Repeat this exercise regularly to adapt to changing market conditions.

Implementing a Forex Trading Strategy

There is no such thing as only profitable trades, just as no system is a 100% sure thing. Even a profitable system, say with a 65% profit to loss ratio, still has 35% losing trades. Therefore, the art of profitability is in the management and execution of the trade.

Risk Control

In the end, successful trading is all about risk control. Try to get your trade in the correct direction right out of the gate. Evaluate your trading system, make adjustments and try again. Often, it is on the second or third attempt that your trade will move in the right direction. This practice requires patience and discipline to achieve success.

The Bottom Line

Trading is nuanced and requires as much art as science to execute successfully, which means that there is only a profit-making trade or a loss-making trade. Warren Buffet has said that there are two rules in trading: Rule 1: Never lose money. Rule 2: Remember Rule 1. Stick a note on your computer that will remind you to take small losses often and quickly rather than wait for the big losses.

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