Forex Trading Strategies

Posted on June 23rd, 2008 by admin, under online forex trading.

Forex Trading Strategies

Trading strategies that can be used as an independent system, and in combination with other trade policies, or as a basis for a strategy will be represented in this section. In any case - all represented - a purely subjective opinion and can not be interpreted as “philosophical stone” for Forex.

Bollinger Bands trading strategy(35,2)

The idea is that once prices will cross one of BB lines, tracking begins, and as soon as next candle, having closed, will not punch BB line, entrance in a direction opposite to breakdown.

Depending on the wish BB period (it is equal to 35 for us), temporal scale (4 hours for us) as well as confirmation from other indicators may vary. For example RSI.

Trading strategy of game on levels

Here lies the idea that price, having once reflected from some point, will reflect from it again, and if it will pass, the acceleration will be enough to play in the direction of a puncture. The figure shows the level of yen, the arrow shows the direction of the game, the lines around them - limit of stop-loss, with whose breakdown position is automatically deployed.

As evidence of breakdown or rebound from levels it can be used: rebound - if the price had passed longer way to the top without correction, relative to other movements. Breakdown - the price often
“Nuzzles” in the level, gradually approaching the rebound low (see figure)

Trading Strategy by Moving Average

It is possible to construct profitable system even on the most simple indicators. This example has a 2 movings with periods of 21 and 70. After breakdown of cost of one of movings standby begins. If prices deployed, not having reach the second (older) moving, the entrance is carried out while crossing (or slightly earlier), MA (21). Stop-loss placed below the recent peak. The system has flaws - one of them is the wrong signal at the conclusion of the trend. However, much advantage is that it always follows trend, contrary
to the wishes of the inexperienced player to play against him:)

Trading strategy by MACD

One of the most simple ways of game at presence of a trend. MACD 12/26 with an alarm line 7 is used on the graph. The entrance is carried out: Sale - at movement of MACD from a high hump downwards, at leaving
MACD below an alarm line. Closing of a pose occurs at MACD crossing “signal” upwards. At low peak achievement by MACD, at closing next turn and already a pose opens long will be closed at crossing by MACD an alarm line from top to down, and opens at crossing from below upwards. And again,
before formation of top by MACD… Stop is put at the price, hardly above recent finding fault (low). The system works well at a bright trend on 4-hour or day time, however the majority advises to refuse from MACD at flat. Nevertheless it is possible to play on MACD in range also. For this purpose 15-30 minutes
interval, and a quite other parameters of an alarm line are necessary. I suggest you to play with coefficients and to look, that will happen. The given tool have some hidden opportunities. Starting from a method of divergence and finishing by application of oscillators atop of MACD itself. All depends on wish of the trader to find the own weapon…

Stochastic trading strategy

Though there is an opinion that it is bad to define turning points, stochastic index does it quite well on big intervals. I do not recommend to use it on 5-60 minutes, or it is necessary to increase number of the periods (Stoch (35), Stoch (55), etc.) I have tried stochastic with the period 14 (by default). The system is such: an entrance is made after return crossing an alarm level aside this crossing. Levels are defined by the trader. Since a week-long trend is descending, the bottom rod is taken (8) and top (75) (it can by the way be hardly above, the entrance will be even earlier, but not above 78-80!) Stop becomes more likely fixed, by percent from the deposit (for example 1.5 from 100 K i.e. on 150 pips. At adjustment it is possible to play with alarm levels, the period of stochastic, and also to enter at crossing short moving (it usually constucts together) behind an alarm level.

Trading strategy game by Fibo-levels

One of the most common systems, based on fact that price, being adjusting, will go a distance equal to the movement factor multiplied by 0,236 0,382 0.5 and 0,618. The signal “prepare” occurs when, after a lengthy movements price had adjusted to not less than 0.2-0.3 part of this movement. fibo-levels are drawn, and orders for buy/sell about them establishes, with the foot above the next-fibo level. (if you have about 0,382,
stop is just above 0.5, when about 0.5, stop is above 0.618 …. nearly 0,618 Ц stop is above the peak, either immediately (0.65).

For example: After yen falling to 107.15 from 105.20 we draw fibo-levels (we also draw level after falling from 106.70 to 105.20). After the start of correction we put a warrant for the sale of about 0,382 correction from a large drop (level coincides almost exactly with a 50% drop as little correction). So Sell USDJPY 105.95, Stop above 0.5 from a large drop, to 106.30 … The level was the samples, and a warrant is selling about 0.5 from a large drop (note, the level again almost coincided with a fall of 0,618 smaller) So, Sell USDJPY 106.15, S / L 106.50 At this time, the level of 50% correction has stood (in this case, the convergence of 2 x levels in one place has had strong support bears.)

What we receive in the future:

The first red arrow points to our entrance points. Then almost 2-day consolidation followed  after which falling continued. The second arrow marks re-entry into the market after the correction, which ended about the previous low.

Depending on the test period and your preferences three strategies of work in the Forex are possible.

STRATEGY 1. Long-term maintenance of open positions (from a few days to several months). It is used by strategical investors and semi-professional speculators. It is most effective when trend starts and the least profitable at the side or sluggish trends. Mandatory insurance and relevant work expeditiously to the market’s biggest stock options are needed in doing so.

STRATEGY 2. Work on the medium-term trends lasting up to several weeks. This strategy is used mainly semi-professional speculators. This strategy may take advantage of all work strategies, can be quite long, and fairly short. Hedging using options is sometimes used in such transactions.

STRATEGY 3. Its essence is the opening position in the short duration from

several minutes up to several hours – intraday-trade. Implemented by professional players, who can “feel” the market, as well as small speculators, who because of insufficiency of financial resources are not available to use longer-term strategy. Advantage of this type of trading is that you do not expose yourself to risk of and unexpected price changes at a time when you were not in the Forex market. Disadvantage of this strategy is in large

indirect costs (commissions, spreads); great risk of adverse short-term fluctuations in prices. This type of trade throughout the day requires constant concentration, control and strain, which makes it exhausting one compared to the first strategy.

First, you recommended a second strategy of working with the gradual introduction of the benefits of the first and last strategy in sluggish side trends.

You may also need to keep in mind that

there must be the reason for each transaction - fundamental or technical one.

Good luck to you!