Effective Strategies in Forex Trading

Forex trading is the largest marketplace in the world, where the daily volume exceeds trillions and trillions of dollars. Interesting enough, the retail traders are not the ones responsible for such transactions, but institutional players, central and commercial banks, brokerage houses sometimes, and so on.

The part of the daily transactions belonging to the retail trader is so small that it is impossible to be responsible for the daily market moves. For instance, all retail traders in the world only make up about five or six percent at best, of the daily volume in the Forex market.

Thus, their Forex strategies to make a profit from speculating on the currency pairs’ moves, must align with the “smart money,” or the other market forces.

A Forex Trading System for the Retail Trader

Nowadays, any Forex broker offers Forex education materials to its clients. The reason is that the broker and the retail trader are, in fact, partners.

The brokerage house offers access to the interbank market and charges a fee for its services. Therefore, a true brokerage house is interested in having active customers, ones that make a profit.

As such, besides the educational material to find over the Internet, each brokerage house invests in building their customers knowledge about the market. The most effective strategies in Forex trading are:

  • Ride the trend
    • Trend trading focuses on following a series of higher highs and higher lows (in bullish trends) and lower lows and lower highs (bearish trends). For as long as the series hold, the trend won’t reverse.

 

  • Master trend reversal patterns
    • Classic reversal patterns
      • Head and shoulders
      • Rising and falling wedges
      • Double and triple tops
      • Triangles as reversal patterns
      • Rounding tops and bottoms
      • Diamond formations

 

  • Japanese reversal patterns
    • Morning and evening stars
    • Bullish and bearish engulfing
    • Piercing and dark-cloud cover
    • Doji

 

  • Get to know continuation patterns
    • Ascending and descending triangles
    • Bullish and bearish flags
    • Pennants
    • Doji

 

  • Master major trading theories
    • Elliott Waves Theory
      • Markets move in cycles formed of five-wave structures followed by three-wave corrections
        • Gann
          • The 1×1 line has a specific angle for every market security
        • Gartley
          • The father or harmonic patterns, it is the first one to introduce Fibonacci ratios in technical analysis
        • Pitchfork
          • The Median Line has the ability to attract price, so the focus sits with the “gravity” principle – the price keeps coming to it
        • Get to know the importance of oscillators
          • Oscillators are used to find out overbought and oversold levels as well as bullish and bearish divergences
        • Get to know the best trend indicators
          • Ichimoku Kinko Hyo
          • Moving Averages
          • Bollinger Bands
        • Master fundamental analysis
          • Interpret daily economic news
          • Compare different economies around the world
          • Look at the macro picture
          • Put everything together

These are only a few things to consider when building Forex strategies to profit from the market. Either used individually or together, they offer traders an educated guess about what the market would do next.