Ea Basket Trading Review.
This is a Basket Trading EA which utilizes suggestions which have been offered within additional discussion boards which Traders are utilizing in order to Trade the Basket associated with sets, a few of these suggestions happen to be utilized in prior Basket EAs and also have existed for a while, I’m simply attempting to consider the very best from the suggestions as well as place all of them in to a good EA that may Trade ninety % of times by itself without having coming upward your own accounts, presently there will be a few treatment needed through the Trader, absolutely no EA may be the ultimate goal. The actual EA configurations tend to be liquid and can alter because period passes based on marketplace problems as well as exactly what demonstrates to operate greatest at that time over time as well as the other Traders have discovered to operate on their behalf. This particular EA is made to.
Click Here to Download A NEW Trading Tool and Strategy For FREE.
Trade whenever amount of a good traditional graph made up of two in order to fourteen sets, for the time being it’ll only use 2 indicators, OFFERS as well as two IXO configurations. The actual IXO and it has configurations is determined by the actual sets, quantity of sets as well as time period utilized as well as will have to end up being modified with regard to greatest outcomes, 1 dimension doesn’t match just about all.
With regard to assist with difficulties listed here are the guidelines:
The actual automatic robot has got the built-in power to have a display chance in the precise period the actual Trade had been positioned as well as shut, it s this that I have to observe, display pictures following the truth tend to be ineffective, along with a display chance in which the candle lights is visible separately, not every crammed collectively.
Recent Searches.
Recent Posts.
Other Searched For.
GREAT Stuff .
Categories.
evolve theme by Theme4Press • Powered by WordPress.

Forex basket trading strategies

For most new traders, the biggest challenge is getting a profitable strategy that works for the long term. Usually, trend-following systems are favored because they tend to have a very good risk-to-reward ratio. Trading the currency market is essentially a numbers game, basically traders look for strategies or systems that have a positive overall yield. The profit factor of any strategy is also very essential, because a profitable strategy should make more money or pips, than it loses. After some extensive research, I have discovered one of such systems. This strategy is built on one of the oldest trading adages around; “cut your losses early and let your profits run” and “the trend is your friend”.
Basket trading involves opening a series of correlated or uncorrelated trades, and after an adequate amount of time, closing the trades when the overall sum of the trades is positive i. e. when the net value of all open trades is positive or close to our targeted profit-value.
The Trading setup.
The truth behind the Forex market is that currencies trend. This means that currencies have a tendency to keep gaining or diminishing over a long period of time. There are a lot of concepts about trading cycles and swings, but in reality if we were to zoom out of our charts we would notice a very obvious and unmistakable trend direction. Basket trading involves gauging the potential strength or weakness of a pair, and placing several trades that align with that analysis.
Below is an example of a one-hour chart and four-hour chart. It clearly shows the swing points in the GBPJPY.
But even with the swing points on the one-hour chart, we can clearly see trend directions on the four-hour chart. This strategy tries to find trending currencies and take advantage of the prevailing trend.
The components of this strategy are:
ii. 20 EMA (Exponential Moving Average) applied to the close.
The premise on which this strategy is built is the fact that currencies trend; so a strong currency would be expected to gain over a considerable period of time. So we would wait to identify either strength or weakness of a currency, and then trade that currency across several pairs. We need the USD index to identify the strength of weakness of the USD, and the 20EMA to take our trade entries.
This strategy can be applied to several currencies, but my interest is strictly focused on the USD. Other indexes can be found and used to trade other currencies.
Below is a one-hour chart showing the USD index with the 20EMA.
We can notice how the EMA effectively shows us whether the index is weak or strong. The EMA pointing downwards, with price constantly below it is a strong indication of weakness. USD strength is represented by a close of the index above the 20EMA.
We can also observe that there are times when the index bounces off the 20EMA; with this in mind we employ a signal filter.
After a close above the 20EMA, we wait for two candles more to close above the EMA, and ensure that the last candle is bullish before making a valid conclusion about the USD strength or weakness.
Three simple steps, for USD strength:
1. A close above the 20EMA.
2. Wait for two more candles to close above the 20EMA.
3. The last candle has to be bullish.
The chart below illustrates the sequences of events before taking the actual trading decision.
Zooming out, we can see that this particular signal was taken after a major bullish move and a bounce off the 20EMA.
The cross section between the white horizontal line and yellow vertical line mark the close of the candle that signals USD strength on the index chart.
At this point, we have resolved that the USD is strong and expect it to gain in any pair combination. Our next step is to select our pairs: GBPUSD, EURUSD, USDNOK, USDSEK and USDCHF. We would sell the GBPUSD and EURUSD, and buy the USDNOK, USDSEK and USDCHF; all our trades favoring an appreciation of the USD currency.
Below are the charts showing the USDCHF, EURUSD, USDNOK and USDSEK with the intersection of the yellow and white lines showing our entry points.
This type of trading is a way of diversifying of “investments”, because different currencies have different behaviors and varying degrees of volatility. By spreading our trading capital across different pairs, we are avoiding any negative effect that may arise from price fluctuation on a single currency pair. We are essentially not placing all our “eggs” in a single basket.
The downside to this approach is that a wrong analysis about the currency of our choice could easily lead to losses on all trades taken, and profits during ranging periods would be greatly reduced.
Even though the aim of this strategy is to get as much out of a trend as possible, our exits are also very important. The most effective and profitable is taking an exit at an “opposite” signal i. e. if we were opening our trades based on USD strength, we hold those trades and close only after we have verified USD weakness. This approach would involve us watching some of our profits drop as the trend reverses, but it would give the best from a trend movement.
Our second option is to exit using the fifteen minute chart on the USD index. Here we are watching for “possible” trend reversals, and making quick exits. This means we will not enjoy the full trend, but it also ensures very minimal losses. Using this approach, we would employ a trend line and our 20EMA. If we were trading USD weakness (shorting the USD), we would exit when price breaches the trend line upwards, and closes above the 20EMA. The reverse rules would apply if we were closing our long USD trades.
The chart below gives an illustration of quick exits using the Fifteen-minute chart of the USD index.
Money management is essential with this approach. Our first step is to have a pre-defined target amount in money-terms or pip-count; so once that target is reached, we close and exit all trades. Considering the fact that currencies trend, we can have a minimum target of 5% increase in capital invested. A fixed stop loss of 5% for all the trades; with each trade having a 1% exposure is my recommendation. The basic idea is to maximize trends when they occur, and ensure that only a limited amount of our investment is lost when things go south.
Below is a screenshot of some trades taken after analysis on the YEN index. These trades were taken based on a weak YEN. I hope this article has been informative and helpful.

Bringing the Powerful Basket Approach to Forex Trends.
Position Trading based on technical set ups, Risk Management & Trader Psychology.
Article Summary: Price often favors continuity as displayed in the market's tendency to trend. At the core of these trends is often one currency that is becoming notably stronger or weaker than its counterparts. Once this momentum starts to grow, traders can take a diversified approach in the form of currency baskets to manage opportunities in the Forex market while controlling exposure at the same time.
"Forget the needle, buy the haystack." -- Jack Bogle, Father of Indexing.
Trading and Investing can be as difficult and technical or as simple and elementary as you wish. On the difficult side, you have banks and hedge funds with entire floors dedicated to analyzing market inefficiencies to find an edge that they can exploit to the tune of billions of dollars. On the easy side, you can take a simple approach that looks to buy signs of strength and sell signs of weakness that you’re able to recognize. This article recommends and explains the latter.
The Edge & Execution.
To find an edge, we must locate with a relative degree of certainty an imbalance in the market. An imbalance shows us opportunity that we’re going to attempt to capitalize on. The imbalance can come in the form of new found strength that will continue to rise until it is considered overpriced by the market or new found weakness that begins and will likely continue to fall until it is oversold and underpriced according to other market participants.
Finding an edge is the hard part, even though we’ll discuss methods shortly. The next part and easier portion is finding out how to execute the newfound edge. The two methods we’ll look at are through a handpicked portfolio of currency pairs or a Currency Basket through the Mirror Trader platform.
Finding an Edge in the Currency Market.
Traders have multiple ways of locating an opportunity that can be found by either of two methods. The first method is known as fundamental analysis which is the studying of economic news and data points which show you the prevailing strength or weakness of the underlying economy. The fundamental trader / investor will hang on to every word of central banks and economic surveys that foreshadow weakness or strength of currencies.
Learn Forex: The Playground of the Fundamentalist Is the Economic Calendar.
Developing a Fundamental Trading Strategy – Monetary Policy & Economic Surprises.
Any trader focusing on fundamental analysis, which should be every trader in my opinion, should start with central bank releases which discuss the monetary policy . What you want to see when studying these releases is a central bank that is looking to push their currency in one direction or another based on their economic goals. A central bank, like the Bank of Japan, that is set on weakening their currency will introduce rounds of Quantitative Easing (QE) which is a fancy term to describe the act of flooding the market with their currency to boost the home economy’s exports which provides you an opportunity to sell.
A central bank, like the Federal Reserve of the United States, that may be set on strengthening their currency will begin to talk up their currency in terms of stopping QE or raising interest rates so that it is more expensive to access the currency. Central banks are often the steering wheel of the currency’s strength so you should start reading the releases so that you know when they are increasing measures or switching their approach. The easiest method to stay on top central bank meetings is to follow our Trading the Central Bank News, articles.
The second fundamental aspect you should become aware of is that of economic news releases that surprise against expectations. Economic Forecasts come from the ‘Smartest People in the Room’ so when numbers come outside of expectations consistently it often means that factors that have led to the current consensus of price are changing so opportunities may become present for you. Over the last few months, the currency that has shown the most negative surprises has been the $AUDUSD which has dropped the currency pair from 1.0580 in Mid-April down to 0.9325 on June 11 th or around 1,250 pips .
Learn Forex: Economic Surprises Will Help You See When Opportunities Are Growing.
Getting Technical to See What Has Happened To Price & May Continue.
The second and increasingly popular path is known as technical analysis which is the study of price patterns to identify trends and other trading opportunities. T echnical analysis has taken on a very large role in the FX Market over the past decade. This is because the large amount of data on the economic calendar usually finds its way into the price and technicians like to look for patterns to see opportunities developing by analyzing a chart – and strategizing an approach for trading it.
There are numerous ways of trading from the charts that go far beyond the scope of this article. In short, Technical Analysis is the art of finding trends or trend reversals as early as possible and then staying with that trend until it reverses. To achieve this task, many traders like to include indicators, price action, and other systems for finding ways of placing trades in the present based on price movements of the past so they can hopefully capitalize on the future .
Learn Forex: The Playground of the Technical Trader is the Price Chart.
The Execution – Individual or Basket Approach.
When an edge is discovered as described above, you have multiple ways of engaging in the opportunity. Some traders looking at an individual chart may decide to trade that one currency pair that looks best to them at that time. However, many traders soon discover that the strength or weakness they were able to recognize is coming from only or two currencies and playing out across the board. Because of this a basket approach would be preferred.
A basket approach allows you to take the one currency that is either very strong or very weak and play it against other major currencies. The big benefit of this approach is that you're diversifying the edge you've discovered so that you're not over exposed to one currency pair breaking the broader trend. Here are ways you can trade this advanced yet simple approach.
As of this writing, the weakest currency has been the Austrailian Dollar over the past few months as their central bank has lowered interest rates and the fundamentals that support their economy are faltering such as commodity prices. Selling the AUD against any currency would have been a strong play. However, to manage the exposure in a more professional manner, you could take a position on the AUD Basket – Sell, on MirrorTrader to have diversified exposure to this market drop without worrying if you picked the best pair.
Learn Forex: Trading Forex Baskets Can Help You Manage Risk While Catching Trends.
Conversely, since the middle of May, the strongest currency has been the Japanese Yen. Once you were able to recognize this new trend, you could have placed a trade on the JPY Basket – Buy. In doing this, you would have taken a smart diversified approach to this budding trend.
Learn Forex: JPY Strength Has Been The Headline For The Last Month In Forex.
Like all trading strategies and approaches to the Forex market, trading currency baskets is not without risk. The main benefit to this approach is that you no longer have to worry about whether or not you picked the very best currency pair but rather identifying one strong or weak currency and opening a basket in favor of your findings. This is an approach you will be introduced to in more detail in weeks to come so you can take advantage of the ripple effects of one currency’s strength or weakness.
--Written by Tyler Yell, Trading Instructor.
To be added to Tyler’s e-mail distribution list, please click here .
New to the FX market? Save hours in figuring out what FOREX trading is all about.
Take this free 20 minute “New to FX” course presented by DailyFX Education. In the course, you will learn about the basics of a FOREX transaction, what leverage is, and how to determine an appropriate amount of leverage for your trading.
Register HERE to start your FOREX learning now!
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
Upcoming Events.
Forex Economic Calendar.
Past performance is no indication of future results.
DailyFX is the news and education website of IG Group.

Forex Trading Strategies.
One of the most powerful means of winning a trade is the portfolio of Forex trading strategies applied by traders in different situations. Following a single system all the time is not enough for a successful trade. Each trader should know how to face up to all market conditions, which, however, is not so easy, and requires a deep study and understanding of economics.
In order to help you meet your educational needs and create your own portfolio of trading strategies, IFC Markets provides you both with reliable resources on trading and complete information on all the popular and simple forex trading strategies applied by successful traders.
The trading strategies we represent are suitable for all traders who are novice in trade or want to improve their skills. All the strategies classified and explained below are for educational purposes and can be applied by each trader in a different way.
Tweet Trading Strategies Based on Forex Analysis.
Perhaps the major part of Forex trading strategies is based on the main types of Forex market analysis used to understand the market movement. These main analysis methods include technical analysis, fundamental analysis and market sentiment.
Each of the mentioned analysis methods is used in a certain way to identify the market trend and make reasonable predictions on future market behaviour. If in technical analysis traders mainly deal with different charts and technical tools to reveal the past, present and future state of currency prices, in fundamental analysis the importance is given to the macroeconomic and political factors which can directly influence the foreign exchange market. Quite a different approach to the market trend is provided by market sentiment, which is based on the attitude and opinions of traders. Below you can read about each analysis method in detail.
Tweet Forex Technical Analysis Strategies.
Forex technical analysis is the study of market action primarily through the use of charts for the purpose of forecasting future price trends. Forex traders can develop strategies based on various technical analysis tools including market trend, volume, range, support and resistance levels, chart patterns and indicators, as well as conduct a Multiple Time Frame Analysis using different time-frame charts.
Technical analysis strategy is a crucial method of evaluating assets based on the analysis and statistics of past market action, such as past prices and past volume. The main goal of technical analysts is not the measuring of asset’s underlying value, they attempt to use charts or other tools of technical analysis to determine patterns that will help to forecast future market activity. Their firm belief is that the future performance of markets can be indicated by the historical performance.
Tweet Forex Trend Trading Strategy.
Trend represents one of the most essential concepts in technical analysis. All the technical analysis tools that an analyst uses have a single purpose: help to identify the market trend. The meaning of Forex trend is not so much different from its general meaning - it is nothing more than the direction in which the market moves. But more precisely, foreign exchange market does not move in a straight line, its moves are characterized by a series of zigzags which resemble successive waves with clear peaks and troughs or highs and lows, as they are often called.
As we mentioned above, forex trend is comprised of a series of highs and lows, and depending on the movement of those peaks and troughs one can understand the trend’s type on the market.
Though most people think that foreign exchange market can be either upward or downward, actually there exist not two but three types of trends:
Traders and investors confront three types of decisions: go long, i. e. to buy, go short, i. e. to sell, or stay aside, i. e. to do nothing. During any type of trend they should develop a specific strategy.
The buying strategy is preferable when the market goes up and conversely the selling strategy would be right when the market goes down. But when the market moves sideways the third option – to stay aside - will be the wisest decision.
Tweet Support and Resistance Trading Strategy.
In order to completely understand the essence of support and resistance trading strategy you should firstly know what a horizontal level is. Actually, it is a price level indicating either a support or resistance in the market. The support and resistance in technical analysis are the terms for price lows and highs respectively. The term support indicates the area on the chart where the buying interest is significantly strong and surpasses the selling pressure. It is usually marked by previous troughs. Resistance level, contrary to the support level, represents an area on the chart where selling interest overcomes buying pressure. It is usually marked by previous peaks.
In order to develop a support and resistance strategy you should be well aware of how the trend is identified through these horizontal levels. Thus, for an uptrend to go on, each successive support level should be higher than the previous one, and each successive resistance level should be higher than the one preceding it.
In case this is not so, for instance, if the support level comes down to the previous trough, it may signify that the uptrend is coming to the end or at least it is turning into a sideways trend. It is likely that trend reversal from up to down will occur. The opposite situation takes place in a downtrend; the failure of each support level to move lower than the previous trough may again signal changes in the existing trend.
The concept behind support and resistance trading is still the same - buying a security when we expect it to increase in price and sell when expecting its price to go down. Thus, when the price falls to the support level, traders decide to buy creating demand and driving the price up. In the same way, when the price rises to a resistance level, traders decide to sell, creating a downward pressure and driving the price down.
Tweet Forex Range Trading Strategy.
Range trading strategy, which is also called channel trading, is generally associated with the lack of market direction and it is used during the absence of a trend. Range trading identifies currency price movement in channels and the first task of this strategy is to find the range. This process can be carried out by connecting a series of highs and lows with a horizontal trendline. In other words, the trader should find the major support and resistance levels with the area in between known as “trading range”.
In range trading it’s quite easy to find the areas to take profit. You can buy at support and sell at resistance as long as the security hasn’t broken out of the channel. Otherwise, if the breakout direction is not favorable for your position, you may undergo huge losses.
Range trading actually works in a market with just enough volatility due to which the price goes on wiggling in the channel without breaking out of the range. In the case the level of support or resistance breaks you should exit range-based positions. The most efficient way of managing risks in range trading is the use of stop loss orders as most traders do. They place sell limit orders below resistance when selling the range and set the take profit down near support. When buying support they place buy limit orders above support and place take profit orders near the previously identified resistance level. And risks can be managed by placing stop loss orders above the resistance level when selling the resistance zone of a range, and below the support level when buying support.
Tweet Technical Indicators in Forex Trading Strategies.
Technical indicators are calculations which are based on the price and volume of a security. They are used both to confirm the trend and the quality of chart patterns, and to help traders determine the buy and sell signals. The indicators can be applied separately to form buy and sell signals, as well as can be used together, in conjunction with chart patterns and price movement.
Technical analysis indicators can form buy and sell signals through moving average crossovers and divergence. Crossovers are reflected when price moves through the moving average or when two different moving averages cross each other. Divergence happens when the price trend and the indicator trend move in opposite directions indicating that the direction of price trend is weakening.
They can be applied separately to form buy and sell signals, as well as can be used together, in conjunction with the market. However, not all of them are used widely by traders. The following indicators mentioned below are of utmost importance for analysts and at least one of them is used by each trader to develop his trading strategy:
Moving Average Bollinger Bands Relative Strength Index (RSI) Stochastic Oscillator Moving Average Convergence/Divergence (MACD) ADX Momentum.
You can easily learn how to use each indicator and develop trading strategies by indicators.
Tweet Forex Charts Trading Strategies.
In Forex technical analysis a chart is a graphical representation of price movements over a certain time frame. It can show security’s price movement over a month or a year period. Depending on what information traders search for and what skills they master, they can use certain types of charts: the bar chart, the line chart, the candlestick chart and the point and figure chart.
Also they can develop a specific strategy using the following popular technical chart patterns:
Triangles Flags Pennants The Wedge The Rectangle Pattern The Head and Shoulders Pattern Double Tops and Double Bottoms Triple Tops and Triple Bottoms.
You can easily learn how to use charts and develop trading strategies by chart patterns.
Tweet Forex Volume Trading Strategy.
Volume shows the number of securities that are traded over a particular time. Higher volume indicates higher degree of intensity or pressure. Being one of the most important factors in trade it is always analyzed and estimated by chartists. In order to determine the upward or downward movement of the volume, they look at the trading volume gistograms usually presented at the bottom of the chart. Any price movement is of more significance if accompanied by a relatively high volume than if accompanied by a weak volume.
By viewing the trend and volume together, technicians use two different tools to measure the pressure. If prices are trending higher, it becomes obvious that there is more buying than selling pressure. If the volume starts to decrease during an uptrend, it signals that the upward trend is about to end.
As mentioned by Forex analyst Huzefa Hamid "volume is the gas in the tank of the trading machine". Though most traders give preference only to technical charts and indicators to make trading decisions, volume is required to move the market. However, not all volume types may influence the trade, it’s the volume of large amounts of money that is traded within the same day and greatly affects the market.
Tweet Multiple Time Frame Analysis Strategy.
Since a security price meanwhile moves through multiple time frames it’s very useful for traders to analyze various time frames while determining the “trading circle” of the security. Through the Multiple Time Frame Analysis (MTFA) you can determine the trend both on smaller and bigger scales and identify the overall market trend. The whole process of MTFA starts with the exact identification of the market direction on higher time frames (long, short or intermediary) and analyzing it through lower time frames starting from a 5-minute chart.
Experienced trader Corey Rosenbloom believes that in multiple time frame analysis, monthly, weekly and daily charts should be used to assess when the trends are moving in the same direction. However, this may cause problems because time frames don’t always align and different kind of trends take place on different time frames. According to him, the analysis of lower time frames gives more information.
Tweet Forex Trading Strategy Based on Fundamental Analysis.
While technical analysis is focused on the study and past performance of market action, Forex fundamental analysis concentrates on the fundamental reasons that make an impact on the market direction.
The premise of Forex fundamental analysis is that macroeconomic indicators like economic growth rates, interest and unemployment rates, inflation, or important political issues can have an impact on financial markets and, therefore, can be used for making trading decisions.
Technicians do not find it necessary to know the reasons of market changes, but fundamentalists try to discover “why”. The latter analyze macroeconomic data of a specific country or different countries to forecast the given country’s currency behaviour in the nearest future.
Based on certain events or calculations, they may decide to buy the currency in the hope that the latter will rise in value and they will be able to sell it at a higher price, or they will sell the currency to buy it later at a lower price.
The reason why fundamental analysts use so long timeframe is the following: the data they study are generated much more slowly than the price and volume data used by technical analysts.
Tweet Forex Trading Strategy Based on Market Sentiment.
Market sentiment is defined by investors’ attitude towards the financial market or a particular security. What people feel and how this makes them behave in Forex market is the concept behind market sentiment.
The importance of understanding the opinions of a group of people on a specific topic cannot be underestimated. For each purpose sentiment analysis can offer insight that is valuable and helps to make right decisions.
All traders have their own opinions about the market movement, and their thoughts and opinions which are directly reflected in their transactions help to form the overall sentiment of the market.
The market by itself is a very complex network made up of a number of individuals whose positions actually represent the sentiment of the market. However, you alone cannot make the market move to your favor; as a trader you have your opinion and expectations from the market but if you think that Euro will go up, and others do not think so, you cannot do anything about it.
Herein, the market sentiment is considered bullish if investors anticipate an upward price movement, while if investors expect the price to go down, the market sentiment is said to be bearish. The strategy of following Forex market sentiment serves as a good means of predicting the market movement and is of high importance for contrarian investors, who aim to trade in the opposite direction of the market sentiment. Thus, if the prevailing market sentiment is bullish (all the traders buy), a contrarian investor would sell.
Tweet Forex Strategies Based on Trading Style.
Forex trading strategies can be developed by following popular trading styles which are day trading, carry trade, buy and hold strategy, hedging, portfolio trading, spread trading, swing trading, order trading and algorithmic trading.
Using and developing trading strategies mostly depends on understanding your strengths and weaknesses. In order to be successful in trade you should find the best way of trading that suits your personality. There is no fixed “right” way of trading; the right way for others may not work for you. Below you can read about each trading style and define your own.
Tweet Forex Day Trading Strategies.
Day trading strategies include scalping, fading, daily pivots and momentum trading. In case of performing day trading you can carry out several trades within a day but should liquidate all the trading positions before the market closure.
An important factor to remember in day trading is that the longer you hold the positions, the higher your risk of losing will be. Depending on the trading style you choose, the price target may change. Below you can learn about the most widely used day trading strategies.
Tweet Forex Scalping Strategy.
Forex scalping is a day trading strategy which is based on quick and short transactions and is used to make many profits on minor price changes. This type of traders, called as scalpers, can implement up to 2 hundreds trades within a day believing that minor price moves are much easier to follow than large ones.
The main objective of following this strategy is to buy /sell a lot of securities at the bid /ask price and in a short time sell/buy them at a higher/lower price to make a profit.
There are particular factors essential for Forex scalping. These are liquidity, volatility, time frame and risk management. Market liquidity has an influence on how traders perform scalping. Some of them prefer trading on a more liquid market so that they can easily move in and out of large positions, while others may prefer trading in a less liquid market that has larger bid-ask spreads.
As far as it refers to volatility, scalpers like rather stable products, for them not to worry about sudden price changes. If a security price is stable, scalpers can profit even by setting orders on the same bid and ask, making thousands of trades. The time frame in scalping strategy is significantly short and traders try to profit from such small market moves that are even difficult to see on a one minute chart.
Together with making hundreds of small profits during a day, scalpers at the same time can sustain hundreds of small losses. Therefore, they should develop a strict risk management to avoid unexpected losses.
Tweet Fading Trading Strategy.
Herein, this strategy supposes selling the security when its price is rising and buying when the price is falling, or as called “fading”.
It is referred as a contrarian day trading strategy which is used to trade against the prevailing trend. Unlike other types of trading which main target is to follow the prevailing trend, fading trading requires to take a position that goes counter to the primary trend.
The main assumptions on which fading strategy is based are:
Securities are overbought Early buyers are ready to take profits Current buyers may appear at risk.
Although “Fading the market” can be very risky and requires high risk tolerance, it can be extremely profitable. To carry out Fading strategy two limit orders can be placed at the specified prices - a buy limit order should be set below the current price and a sell limit order should be set above it.
Fading strategy is extremely risky since it means trading against the prevailing market trend. However, it can be advantageous as well - fade traders can make profit from any price reversal because after a sharp rise or decline the currency it is expected to show some reversals. Thus, if used properly, fading strategy can be a very profitable way of trading. Its followers are believed to be risk takers who follow risk management rules and try to get out of each trade with profit.
Tweet Daily Pivot Trading Strategy.
Pivot Trading aims to gain a profit from the currency’s daily volatility. In its basic sense the pivot point is defined as a turning point. It is considered a technical indicator derived by calculating the numerical average of the high, low and closing prices of currency pairs.
The main concept of this strategy is to buy at the lowest price of the day and sell at the highest price of the day.
In mid-1990s a professional trader and analyst Thomas Aspray published weekly and daily pivot levels for the cash forex markets to his institutional clients. As he mentions, at that time the pivot weekly levels were not available in technical analysis programs and the formula was not widely used either.
But in 2004 the book by John Person, “Complete Guide to Technical Trading Tactics: How to Profit Using Pivot Points, Candlesticks & Other Indicators” revealed that pivot points had been in use for over 20 years till that time. In the last years it was even more surprising for Thomas to discover the secret of quarterly pivot point analysis, again due to John Person.
Currently the basic formulae of calculating pivot points are available and are widely used by traders. Moreover, pivot points calculator can be easily found on the Internet.
For the current trading session the pivot point is calculated as:
Pivot Point = (Previous High + Previous Low + Previous Close) / 3.
The basis of daily pivots is to determine the support and resistance levels on the chart and identify the entry and exit points. This can be done by the following formulae:
R2 = P + (H - L) = P + (R1 - S1)
S2 = P - (H - L) = P - (R1 - S1)
L - Previous Low.
H - Previous High.
R1 - Resistance Level 1.
S1 - Support Level 1.
R2 - Resistance Level 2.
S2 - Support Level 2.
Tweet Momentum Trading Strategy.
Momentum traders use different technical indicators, like MACD, RSI, momentum oscillator to determine the currency price movement and decide what position to take. They also consider news and heavy volume to make right trading decisions. Momentum trading requires subscribing to news services and monitoring price alerts to continue making profit.
According to a well known financial analyst Larry Light, momentum strategies can help investors beat the market and avoid crashes, when coupled with trend-following, which focuses only on stocks that are gaining.
Tweet Carry Trade Strategy.
Investors who follow this strategy borrow money at a low interest rate to invest in a security that is expected to provide higher return.
Carry trade allows to make a profit from the non-volatile and stable market, since here it rather matters the difference between the interest rates of currencies; the higher the difference, the greater the profit. While deciding what currencies to trade by this strategy you should consider the expected changes in the interest rates of particular currencies.
The principle is simple - buy a currency whose interest rate is expected to go up and sell the currency whose interest rate is expected to go down.
However, this does not mean that the price changes between the currencies are absolutely unimportant. Thus, you can invest in a currency because of its high interest rate, but if the currency price drops and you close the trade, you may find that even though you have profited from the interest rate you have also lost from the trade because of the difference in the buy/sell price. Therefore, carry trade is mostly suitable for trendless or sideways market, when the price movement is expected to remain the same for some time.
Tweet Forex Hedging Strategy.
Hedging is generally understood as a strategy which protects investors from occurrence of events which can cause certain losses.
The idea behind currency hedging is to buy a currency and sell another in the hope that the losses on one trade will be offset by the profits made on another trade. This strategy works most efficiently when the currencies are negatively correlated.
Thus, you should buy a second security aside from the one you already own in order to hedge it once it moves in an unexpected direction. This strategy, unlike most trading strategies already discussed, is not used to make a profit; it rather aims to reduce the risk and uncertainty.
It is considered a certain type of strategy whose sole purpose is to mitigate the risk and enhance the winning possibilities.
As an example we can take some currency pairs and try to create a hedge. Let’s say that at a specific time frame the US dollar is strong, and some currency pairs including USD show different values. Like, GBP/USD is down by 0.60%, JPY/USD is down by 0.75% and EUR/USD is down by 0.30% . As a directional trade we had better take the EUR/USD pair which is down the least and therefore shows that if the market direction changes, it will go higher more than the other pairs.
After buying the EUR/USD pair we need to choose a currency pair that can serve as a hedge. Again we should look at the currency values and choose the one which shows the most comparative weakness. In our example it was JPY, and EUR/JPY would be a good choice. Thus, we can hedge our trade buying EUR/USD and selling EUR/JPY.
What is more important to note in currency hedging is that risk reduction always means profit reduction, herein, hedging strategy does not guarantee huge profits, rather it can hedge your investment and help you escape losses or at least reduce its extent. However, if developed properly, currency hedging strategy can result in profits for both trades.
Tweet Portfolio / Basket Trading Strategy.
Portfolio trading, which can also be called basket trading, is based on the combination of different assets belonging to different financial markets (Forex, stock, futures, etc.).
The concept behind portfolio trading is diversification, one of the most popular means of risk reduction. By a smart asset allocation traders protect themselves from market volatility, reduce the risk extent and keep the profit balance.
It’s very important to create a diversified portfolio to reach your trading goal. Otherwise, this kind of strategy will be aimless.
You should compile your portfolio with such securities (currencies, stocks, commodities, indices) which are not strictly correlated, meaning that their returns do not move up and down in a perfect unison. By mixing up different assets in your portfolio which are in negative correlation, with one security’s price going up and the other’s going down you can keep the portfolio’s balance, hence preserving your profit and reducing the risk.
Currently IFC Markets provides Personal Composite Instrument (PCI) creation and trading technology based on GeWorko Method, which makes it even much easier to perform portfolio trading. The technology allows to create portfolios starting with only two assets and include up to tens of different financial instruments, open both long and short positions within a portfolio, view the assets’ price history stretching up to 40 years, create your own PCIs, use a wide variety of market analysis tools, apply different trading strategies and constantly optimize and rebalance your investment portfolio. In other words, GeWorko Method is a solution that lets you develop and apply strategies which suit best your preferences.
Tweet Buy and Hold Strategy.
A trader who employs buy and hold investment strategy is not interested in short-term price movements and technical indicators. Actually, this strategy is mostly used by stock traders; however some Forex traders also use it, referring to it as a particular method of passive investment. They commonly rely on fundamental analysis rather than technical charts and indicators. This already depends on the type of investor to decide how to apply this strategy.
A passive investor would watch the fundamental factors, like inflation and unemployment rates of the country whose currency he has invested in, or would rely on the analysis of the company whose stock he owns, considering that company’s growth strategy, the quality of its products, etc.
For an active investor it would be more effective to apply technical analysis or other mathematical measures to decide whether to buy or sell.
Tweet Spread / Pair Trading Strategy.
By this strategy traders meanwhile open two equal and directly opposite positions which can compensate each other keeping the trading balance.
Spread trading can be of two types: intra-market and inter-commodity spreads. In the first case traders can open long and short positions on the same underlying asset trading in different forms (e. g. in spot and futures markets) and on different exchanges, while in the second case they open long and short positions on different assets which are related to each other, like gold and silver.
In spread trading it’s important to see how related the securities are and not to predict the market movement. It is important to find related trading instruments with a noticeable price gap to keep the positive balance between risk and reward.
Tweet Swing Trading Strategy.
Swing trading is the strategy by which traders hold the asset within one to several days waiting to make a profit from price changes or so called “swings”.
A swing trading position is actually held longer than a day trading position and shorter than a buy-and-hold trading position, which can be hold even for years.
Swing traders use a set of mathematically based rules to eliminate the emotional aspect of trading and make an intensive analysis. They can create a trading system using both technical and fundamental analyses to determine the buy and sell points. If in some strategies market trend is not of primary importance, in swing trade it’s the first factor to consider.
The followers of this strategy trade with the primary trend of the chart and believe in the “Trend is your friend” concept. If the currency is in an uptrend swing traders go long, that is, buy it. But if the currency is in a downtrend, they go short - sell the currency. Often the trend is not clear-cut, it is sideways-neither bullish, nor bearish. In such cases the currency price moves in a predictable pattern between support and resistance levels. The swing trading opportunity here will be the opening of a long position near the support level and opening a short position near the resistance level.
Tweet Forex Strategies Based on Trading Order Types.
Order trading helps traders to enter or exit a position at the most suitable moment by using different orders including market orders, pending orders, limit orders, stop orders, stop loss orders and OCO orders.
Currently, advanced trading platforms provide various types of orders in trading which are not simply ''buy button'' and ''sell button''. Each type of trading order can represent a specific strategy. It's important to know when and how to trade and which order to use in a given situation in order to develop the right order strategy.
The most popular Forex orders that a trader can apply in his trade are:
Market orders - a market order is placed to instruct the trader to buy or to sell at the best price available. The entry interfaces of market order usually have only ''buy'' and ''sell'' options which make it quick and easy to use. Pending Orders – pending orders which are usually available in six types allow traders to buy or sell securities at a previously specified price. The pending orders-buy limit, sell limit, buy stop, sell stop, buy stop limit and sell stop limit - are placed to execute a trade once the price reaches the specified level. Limit Orders - a limit order instructs the trader to buy or sell the asset at a specified price. This means that first of all the trader should specify the desired buy and sell prices. The buy limit order instructs him to buy at the specified price or lower. And the sell limit order instructs to sell at the specified price or even higher. Once the price reaches the specified price, the limit order will be filled. Stop orders-a sell stop order or buy stop order is executed after the stop level, the specified price level, has been reached. The buy stop order is placed above the market and the sell stop order is set below the market. Stop loss orders - a stop loss order is set to limit the risk of trade. It is placed at the specified price level beyond which a trader doesn't want or is not ready to risk his money. For a long position you should set the stop loss order below the entry point which will protect you against market drops. Whereas, for a short position place the order above the trade entry to be protected against market rises. OCO – OCO (one-cancels-the-other) represents a combination of two pending orders which are placed to open a position at prices different from the current market price. If one of them is executed the other will automatically be canceled.
Tweet Algorithmic Trading Strategies.
This kind of computer program works by a set of signals derived from technical analysis. Traders program their trade by instructing the software what signals to search for and how to interpret them.
High-grade platforms include complementary platforms which give an opportunity of algorithmic trading. Such advanced platforms through which traders can perform algorithmic trading are NetTradeX and MetaTrader 4.
NetTradeX trading platform besides its main functions, provides automated trading by NetTradeX Advisors. The latter is a secondary platform which contributes to automated trading and enhances the main platform’s functionality by the NTL+ (NetTradeX Language). This secondary platform also allows to perform basic trading operations in a "manual" mode, like opening and closing positions, placing orders and using technical analysis tools.
MetaTrader 4 trading platform also gives a possibility to execute algorithmic trading through an integrated program language MQL4. On this platform traders can create automatic trading robots, calledAdvisors, and their own indicators. All the functions of creating advisors, including debugging, testing, optimization and program compilation are performed and activated in MT4 Meta-Editor.
The Forex trading strategy by robots and programs is developed mainly to avoid the emotional component of trade, as it is thought that the psychological aspect prevents to trade reasonably and mostly has a negative impact on trade.
© IFCMARKETS. CORP. 2006-2017 IFC Markets is a leading broker in the international financial markets which provides online Forex trading services, as well as future, index, stock and commodity CFDs. The company has steadily been working since 2006 serving its customers in 18 languages of 60 countries over the world, in full accordance with international standards of brokerage services.
Risk Warning Notice: Forex and CFD trading in OTC market involves significant risk and losses can exceed your investment.
IFC Markets does not provide services for United States and Japan residents.