TradingSkills

Are you frustrated and exhausted by making consistent losses every single trading day? Do you have the genuine desire to take your trading skills to the next level and attain financial independence from trading forex?

Well, this write-up will enlighten you on some of the proven trading strategies that traders have used since the onset of the financial markets to extract profits from the forex market consistently.

Due to the dynamic nature of the forex markets, many novice traders can find it daunting and frustrating to trade and get profits from the markets.

There’s always the potential to strike it big with forex trading, but what many forex gurus or experts fail to convey is that more than 80% of traders blow their accounts, especially those dominated by greed and without a proven and backtested forex trading strategy.

Why it’s Important to Have a Forex Trading Strategy

Before delving into the importance of having a proven forex trading strategy, it’s important to mention that traders should have a trading plan covering aspects of risk management, how to manage one’s emotions and the strategy they use when carrying out their technical analysis.

A well-thought-out strategy should clearly outline all the parameters that need to be met for entry and exit points in the market to eliminate guesswork. Otherwise, trading can turn into gambling, which can dent your finances if you don’t have deep pockets.

The Main Forex Trading Strategy Categories

a. ) Scalping

Traders who subscribe to the scalping strategy are focused on making profits from small or micro market movements within short periods, usually on time frames shorter than 15 minutes. However, scalping is not for everyone, as it often requires quick reflexes and decision-making skills.

Pros of the Forex Scalping Strategy

– Increased success rate
– More trading opportunities as opposed to higher time frames, like the four-hour (H4) or daily.
– Reduced exposure to risk

Cons:
– Can be strenuous and exhausting since it requires a lot of fast thinking.
– Highly sensitive to slippage

b. ) Day trading

Like the scalping strategy, day trading also has a fan base and is preferred by forex traders who don’t like operating in a fast-paced environment. Trades are executed within a 30-minute, one-hour, four-hour, or daily timeframe. It often entails opening a position and riding the momentum until the end of the day.

Pros of the Day Trading Forex Strategy
– It has a relatively low risk of exposure.
– Zero rollover expenses
– Reduces opportunity costs because of an account’s liquidity

Cons
– The strategy can be highly sensitive to volatility.

c. ) The Swing Trading Strategy

This is a mid-term forex trading strategy that often rewards patient traders with excellent results. It entails holding a position for more than two to three days and deriving profits from the markets by making note of the swing lows and swing highs.

Pros of the Swing Trading Forex Trading Strategy
– Swing traders don’t have to stress over the short-term volatility because it’s not important.
– Provided you have a solid trading plan and can pick the tops and bottoms with some degree of precision, it’s easy to experience life-changing results.

Cons
– Extra rollover cost

Proven Forex Trading Strategies for Beginners

By now, I’m certain that you have a great understanding of the three main forex trading strategy categories. Now, we are going to explore some of the proven strategy options that you could adapt and implement into your trading arsenal.

However, it’s important to note that these strategies are not impervious to risk. Thus, as a forex trader, it’s your responsibility to exercise sound judgment and implement proper risk management because, as much as the strategies will increase your odds of making profits, there are days when you’ll experience losses.

So, take time to back-test these strategies or get a demo account and use these strategies there for some time before getting a live account.

1. The Support and Resistance Forex Trading Strategy

This is a strategy that produces excellent results when the currency pair that you are trading is ranging. The logic behind the strategy is that the market will turn bearish at a level of resistance and bullish at a level of support.

Many tools, like Fibonacci and Bollinger bands, can also be used to establish support and resistance levels, and traders have the freedom to settle for a tool that they’re comfortable using.

2. The EMA Crossover Trading Strategy

Arguably, it’s one of the most used forex trading indicators and strategies worldwide, and forex traders love using it because it helps them establish a direction bias on any chart at a moment’s glance.

Thus, you can execute trades with some degree of confidence, knowing that the odds are stacked in your favor. Quite often, traders employ EMA crossover strategies of different values (one higher and the other lower) and then enter the market based on the direction of the cross.

One of the most common EMA crossing combos is the 13 and 26 crossover strategy.

3. The London Breakout Forex Trading Strategy

Over the years, many traders have noted that the direction of most forex currency pairs is determined at the London open trading session.

To effectively use this strategy, you should mark the highs and lows of the Asian session and buy when a candle closes above this range or sell when a bearish candle opens below this trading range.

It’s advisable to position your stop loss below the lowest trading range of the Asian trading session during buys and vice versa for sales. Always aim for a 1:2 risk-to-profit ratio.

Important Rules to Bear in Mind When Using Forex Trading Strategies

1. Keep an Updated Trading Journal – Recording all the details of the trades you take daily is the fastest way to improve your trading prowess.

2. Keep Your Emotions in Check – If you want to have a chance at being a consistently profitable forex trader, then you must learn to keep your emotions in check. That’s why it’s advisable to have a detailed plan. Plan the trade, trade the plan, and don’t deviate from it.

3. Set Realistic Profit Targets – Manage your greed, especially when you have had consecutive winning streaks. Also, always remember to check the volatility levels of the currency pair you are trading. The more volatile the currency pair, the higher the profit target you should set.

Conclusion

Forex trading can be a promising and rewarding career if done correctly, and that’s why traders should have a trading plan with well-thought-out, proven, and backtested trading strategies. Don’t choose a strategy based on your friend’s recommendation or what some forex guru who makes money selling courses on YouTube told you.

Rather, you’ll need to choose a plan that fits in with your lifestyle and your personality. Lastly, don’t go in blind with a live trading account without trying the strategy on a demo account over a period.

If you have been in the forex trading field for more than one or two years, then I am certain that you must have stumbled across one of the most widespread forex trading philosophies, which is commonly referred to as the ICT methodology.

For those wondering what ICT means, well, it stands for Inner Circle Trader, and this style of trading mainly focuses on pure price action and is devoid of the widespread common use of expert advisors (EAs).

To help you become more enlightened regarding ICT trading and the techniques used to extract profits from the financial markets, I am going to delve into all the details about the Inner Circle Trading model, and hopefully, you’ll be able to have a better understanding of how you can implement it into your trading strategies.

What is the ICT Concept in Trading?

The ICT trading strategy relies on some essential concepts that every aspiring trader must learn to successfully implement this trading strategy into their style. Below are some of the concepts that you can use to extract profits and trade in liaison with the big banks and market makers.

1. Displacement

In layman’s terms, displacement refers to a short, powerful burst in price movement that results in buying or selling pressure. You can easily spot a displacement happening in your charts by scanning for single, large candle groups, which may be all bullish or bearish.

Normally, these candles tend to have very large bodies with little to no wicks, which is a strong signal of agreement between sellers and buyers.

It’s also worth noting that displacements often happen after a breach in liquidity zones, which in turn creates a shift in market structure and a fair value gap.

2. Liquidity

Arguably, liquidity is one of, if not the most important, concepts as far as ICT trading is concerned. Firstly, I want to inform you that there are two types of liquidity, namely, sell-side and buy-side liquidity.

Sell-side liquidity refers to areas on the chart where traders who are looking to go long in the market will position their stop losses. On the other side of the coin, buy-sell liquidity refers to areas on the chart where short-biased traders will position their stop losses in anticipation of a bearish market shift.

You can easily pinpoint the aforementioned areas at the extremes of the bottoms and tops of ranges. Normally, when a market ranges, most traders are eager to exit trades with the least loss or at breakeven, and this is where you are likely to find the most liquidity.

The market makers, or as forex traders like to call them, “smart money,” are aware of this concept, and they’ll accumulate their positions around levels where they know many retail traders have positioned their stop losses.

It’s worth noting that the market trades through an area with many stops; the market will most likely reverse and trade in the opposite directions in its quest to seek liquidity on the opposite end of the spectrum.

3. Shift in Market Structure

I’m sure you have heard the quote that most traders like to say, which states, “Follow the trend; the trend will never betray you.” Well, for novice traders who may not be familiar with identifying trends on a chart, it’s basically when the market is making higher highs and higher lows in an uptrend.

In a downtrend, the market shifts to lower highs and lower lows. An important point to note is that a shift in market structure occurs at the heels of displacements, which we discussed as the first ICT trading concept.

4. Inducement

It’s tough for the market to trend in a straight line. Quite often, you’ll notice that when the market is bearish, there will always be countertrends in the bullish direction. These tend to occur when liquidity hunting is taking place in lower time frames.

How does it happen, you may ask? Well, the price will get rejected, and in turn, it will target a short-term low or high before proceeding in the direction of the higher time frames.

Inducement targets these short-term highs and lows because these are most likely the zones where most retail traders have positioned their stops, and as you now know, liquidity hunting happens in zones where there is an influx of stops.

5. The Fair Value Gap

Fair value gaps are created within displacements, and they can be defined as instances within the markets where inefficiencies and imbalances happen. If you are conversant with ICT trading principles, then you know it’s always advisable to identify fair value gaps on the chart.

The reason is, that they act as price magnets, as prices will always seek to rectify imbalances.

6. Order Blocks

Order blocks are specific price ranges where the big players, such as institutional banks and smart money, have previously placed sell or buy orders. Thus, it’s safe to say that there are clusters of orders around order blocks, which, as a result, impact market sentiment, liquidity, and price movement once price revisits these areas.

Final Remarks and Key Takeaways

Though the ICT trading concepts may seem outlandish and foreign, I’d urge you to try and implement some of them into your trading strategies and styles, because there have been a significant number of traders who have emulated the concepts and reaped significant rewards from the markets.

In the end, expert advisors such as Fibonacci retracement tools and trend identifiers like the moving averages will add to the confusion. Learn to look at raw price action and carry out your analysis without over-depending on indicators, because the very indicators were programmed by man. As the adage goes, “Man is to error.”

The 3 Best Forex Trading Strategies for Consistent Profits