Best Forex Traders’ Strategies

Best Forex Traders’ Strategies

A trading strategy, in general, is a technique used by a trader to determine the best possible course of action that can help yield returns. In forex there have been a number of strategies developed over time based on trading experiences from seasoned traders. These strategies help forex traders make informed decisions on when to enter or exit a position.

The key aim is to maximise chances of profit and minimise risk. However, to choose what works for you, first learn what the best forex trading strategies are, try them on your demo account and then decide which is the most suitable one for you.

Bladerunner Trading Strategy

No, this isn’t about annihilating ‘replicants’ or any other dystopian scenario. The reason for the name is that it works like a blade to divide the price action into two parts. It uses the concept of price action in order to identify trade entries. The best thing about this strategy is that you can use it on any timeframe or asset. Also, there is no need to use any indicators that are present below the chart, such as MACD, RSI or a Stochastic Oscillator. The only indicator that is important while trading with the Bladerunner strategy is the Exponential Moving Average of 20 days.

How it Works

This strategy works on a very simple logic. If the price goes above the exponential moving average and retests it, it can be expected to move in an upward direction. Conversely, if the price jumps below the EMA, it is likely to continue moving in a downward direction. A trend reversal can be expected when the price value moves through the EMA and the candle closes on the other side of the curve. So, here the EMA works like a moving resistance or support level.

Before making an entry, traders should ensure that the price has moved out of the specified range during the chosen timeframe. Additionally, the price should successfully retest the EMA, i.e., along with the closing of the candle below or above the EMA, the price should bounce off the line and move in the same direction.

If all these conditions are fulfilled, then the signal can be taken as confirmed. In these cases, you can consider a buy action if there is a bullish sentiment and a sell action when the sentiment is bearish. Of course, don’t forget to put in stop losses. This will help you manage risk if the signal turns out to be false.

Dual Stochastic Trade

Stochastic, if used alone, is just an ordinary tool that can confirm signals given by other indicators. However, when two of these Stochastic indicators, with different settings, are merged, it creates a powerful trading strategy, known as Dual Stochastic Trade.

This trading strategy uses two different Stochastic Oscillator indicators, set at the oversold and overbought levels of 20% and 80%. The settings for the two different indicators are:

Stochastic Oscillator 1

  • Smoothing = 10
  • Period K = 21
  • Period D = 4

Stochastic Oscillator 2

  • Smoothing = 2
  • Period K = 5
  • Period D = 2

In this strategy, traders need to lookout for a strong trend. When the stochastic indicators are in the opposite zones, one in the overbought and the other in the oversold zone, it can be expected that the detected trend will keep on moving in the same direction.

Although it might sound simple, the Dual Stochastic strategy takes a lot of time to master. You can also use other technical tools, such as Fibonacci retracement, candlestick patterns and round numbers, to improve accuracy.

Overlapping Fibonacci Trade

Most traders who have been using Fibonacci in forex trading end up using this strategy. Here, you use extensions or Fibonacci retracements to look for a meeting point of a Fibonacci level with signals, such as pivots, resistance or support.

The occurrence of overlapping Fibonacci is exciting for traders because it helps give a clear indication of when to trade. Two very strong Fibonacci levels present at an area of known resistance and support are likely to provide positive results. The simplicity of this strategy makes it highly popular and many traders use only this method for forex trading.

Pros and Cons

The main advantage of this trading strategy is that it is highly flexible in nature and doesn’t need constant monitoring. The downside is that a lot of patience is required and sometimes novice traders could get confused while trying to assess the lines on the chart.

Forex Fractals Strategy

Fractal refers to a steady and sizeable irregular-shaped design that is formed by data. In forex, it essentially refers to a repeating pattern amidst a larger chaotic scenario. The fractal used in the forex market is a pattern formed by five or more candles forming a price pyramid. Occurrence of a fractal pattern means that a new price pyramid is about to start and this is taken as a trading signal.

Many professional forex traders use fractals extensively, which shows how trustworthy the approach is.

Analysis of Fractals

When 5 consecutive bars form a pattern in which the highest high is associated with the average valued candle, it is called an up-fractal. This can be taken as a signal to buy.

When 5 consecutive bars or candles form a pattern where the lowest low is the value of the average candle, it is a down fractal. This is considered as a signal to sell.

There are some factors that you should pay attention to while carrying out fractal analysis:

  1. The duration of formation of the fractal structure is directly proportional to the reliability of its trading signal.
  2. In case there is an occurrence of several fractals at a particular level, after which it breaks, there is a possibility of a strong and long trend in the same direction as that of the breakdown.

Keep in mind that no forex trading strategy provides 100% guarantee of a successful trade. But, they do help analyse price movements and make informed trading decisions. Also, a lot depends on how well you use the selected strategy and your own analytical skills.

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