Comprehensive Guide to all Forex Trading Strategies

The One-stop guide to Mastering all Forex Trading Strategies

Without a doubt, you want to become a master at trading forex. Having the right strategy in place is a good way to start. One such strategy that produces results every time is price action. It is simple, without stress, and very effective.
I will be sharing all of my price action techniques for trading forex in this comprehensive, yet simple-to-use guide, with you. Every strategy I share in this guide is based strictly on price action; there are no indicators or other such confusing techniques.

Definition of Price Action Trading

Price action is an indicator that tracks the up and down movement of a security’s price. Usually, this movement with respect to price changes is a subject of very recent, detailed analysis. The price action trading technique allows a trader read the price movements of the securities he or she is interested in and place trades based on the recent and actual prices of those securities in the market. It implies the trader doesn’t rely only on technical indicators.
Price action, as a forex trading strategy, completely discounts fundamental analysis factors and focuses on recent and current movements in the price of the securities being traded.

50-Pips Every Day Forex Trading Strategy

The strategy is premised on early price movements of a few, highly-liquid currency pairs. In particular, the GBP-USD and EUR-USD currency pairs are best-suited for this strategy.
It works by the trader placing two opposite pending orders in the system once the 7am GMT candlestick closes. Once one of the trades is activated by price movements, the other position automatically cancels.
As implied, the profit target is 50 pips, and a stop-loss order is placed in between 5 and 10 pips above or below the 7am GMT candlestick; after it might have formed fully. Placing the trade this way helps reduce the risk of a loss. Once the trading bets and conditions are placed, let the market take over on your behalf.
Remember that day trading and scalping are short-term forex trading strategies and are inherently risky as a result. Hence, it is important that you have proper plans in place for managing the risk.

Page Contents

The 1-Hour Forex Trading Strategy

As can be implied, the 1-Hour forex trading strategy aims to take advantage of subsisting market trends over a 1-hour or 60-minute time frame.
The upside to the 1-hour forex strategy is that you only need to check in on your trading charts for scalping opportunities only once in every hour of the day. This is much better than sitting at your desk and staring at your computer screen all day. The major currency pairs such as the EUR/USD, USD/JPY, GBP/USD, and the AUD/USD are the easiest to trade using this strategy.
The strategy requires that you use a 100-pip momentum indicator and indicator arrows.

The Weekly Forex Trading Strategy

The Weekly Forex Trading Strategy is borne out of an analysis of the Exponential Moving Average (EMA). Following is how the strategy plays out.
First, it is required that the prior week’s last daily candlestick is closed out at a level above the EMA value. The next step is for the forex trader to anticipate the material price at which the prior week’s maximum in the market is broken, and to place a buy stop order on the H4 closed candlestick at that price. The stop loss order is then placed after the nearest minimum point, but between 50 and 105 pips. And if the nearest minimum point is closer than 50 pips, then the previous extreme value has to be taken for calculations.
From the aforementioned, the last week’s movement range is the take profit range and the break-even point is achieved after the trade moves forward by at least half of its anticipated movement

Support and Resistance Trading Strategy

The support and resistance forex trading strategy is a strategy that is universal in nature, in that the strategy can be applied in other markets different from the forex market; such as in commodities and securities markets. It is a simple strategy to master.
Support and resistance in forex trades are so important that traders spend considerable time and energy watching both very closely. When the price action of a security they are interested in acts like it will bounce off a support level or reverse at a resistance, traders swoop in on the markets to place their bets.
What results overall is that the support and/or resistance levels get reinforced, thus making any trade following the trend profitable.
The secret to trading successfully at support or resistance levels in the market is to increase the probability that a support or resistance level will hold or break for you by analyzing the price action so as to glean a heads up on what outcomes are probable.

The 4-Hour Forex Trading Strategy

The 4-Hour forex trading strategy is premised on following trends in the markets and is oftentimes profitable. The time duration for the strategy to play out in the markets makes it perfect for swing traders.
To use the strategy, a forex trader plots out a 4-Hour base chart to check for standout signals that might pinpoint potentially profitable trading opportunities. Usually, the forex trader would have set up a 1-Hour chart to act as the signal chart; which helps the trader hone in on exact locations in the 4-Hour chart to stake trade bets.
A rule-of-the-thumb is to ensure that the signal chart is at least an hour lower than the base or trading chart. Also, two sets of MA lines will be utilized, in order to make a success of the strategy. One MA line will be a 34-period MA, while the other will be a 55-period MA. The MA lines help the trader decide whether or not a noticed trend in the market is worth placing a trading bet on or not.

Trendline Trading Strategy

Price action in currency markets respond to and bounce off trendlines. The Trendline Trading Strategy works based on this fact, which makes the strategy easy to use once a forex trader understands how to plot trendlines.
The key to successfully using the trendline strategy is to be consistent in how the trendlines are drawn. Also, the more the price action “tests” or bounces off a trendline, the more likely it is that it will break out. It is not uncommon to see the price action break through a trendline only for it to begin testing the trendline again from its other end. This is the price action pulling back, so no forex trader worth his or her onions ought to panic when this happens.
The chart below shows a trading setup based on trendlines that has already seen the price move over a 700-pip profit range.

Trendline Breakout Forex Trading Strategy

The Trendline Breakout Forex Trading Strategy is the direct opposite of the Trendline Trading Strategy and works well with it too. It entails having a trendline on the price action and continuously taking trades off it.
Understand that with the trendline trading strategy, a forex trader is basically trading the up or down bounce of the price action on the trendline; which implies that the price action stays with or “respects” the trendline.
But with the Trendline Breakout Forex Trading Strategy, those rules come into play when the price action breaks or intersects with the trendline. It implies that the current trend has now changed and a trade opened in the direction opposite to that of the current trend in the market is bound to pay off.

Daily Pin bar Forex Trading Strategy

This daily pin bar forex trading price action trading strategy is one every forex trader should be familiar with. Pin bars or candlesticks are important tools forex traders use in analyzing currency markets. They pretty well illustrate ongoing or sudden changes in traders’ sentiments on the markets. 

Most times, the daily pin bars or candlesticks are “very long” — implying that their ranges (the difference between the high price and the low price) could be as much as hundreds of pips. As an example, if a forex trader wants to trade a daily pin bar that has a 450-pip range, then he or she should set his or her stop loss at a little more than 450 pips.

Forex Daily Charts Strategy

Daily charts are excellent places the best forex traders on earth find their most profitable trades in. Inside of a daily chart, there is less market noise and the potential for making a profit in the hundreds-of-pips range is high.
Trading on a daily chart is just way better than, for instance, the 1-Hour timeframe or even shorter timeframes. As stated earlier, there is less noise, and the trade signals are more reliable; plus the potential for turning a profit on trading bets placed is higher. An additional benefit is the fact that the forex trader need not be bothered about daily news and the random price fluctuations they cause.

The Price Action Forex Trading Strategy

The price action forex trading strategy works by the analysis of only one price bar that forms on the trading chart — the inside bar pattern.
The inside bar pattern is a one candlestick pattern which forms during a period of relatively low volatility in the market. The low volatility happens when traders in the market are unsure of where next the price action is headed and are as a result, undecided where to place their next trades.
The eventual breakout of the high or low of the inside bar will cause the price action to move strongly in the direction of the breakout. You might want to regard the inside bar, when it forms, as a coiled spring ready to release and strike. Where it appears too is important. Look out for it in areas on the chart where there is a great imbalance of supply and demand or of sellers and buyers. You will find these areas in areas on the chart where support and resistance is strong and during a 1-2-3 pattern that forms on the charts.

Support Turned Resistance and Resistance Turned Support Forex Trading Strategy

The Resistance Turned Support and the Support Turned Forex Trading Strategy might be confusing to new forex traders, but once they get a hang of it, it becomes a very potent trading tool in their trading arsenal.
The rationale behind the strategy is very simple.
There are times in the market when the prevailing trend is a downtrend; but yet, the price action breaks through a support level, goes down for a while and then returns through the support level it just broke. The implication is that this support level that has just been broken twice now becomes a resistance level from where the price action hits and bounces off.
It becomes a good “SELL” trading opportunity if a setup such as the “railway track” or the “inside bar” forms after this “turnaround.”

Two-Legged Pullback Forex Trading Strategy

The forex trader, Al brooks, made this strategy popular in his price action trading manuals.
The Two-Legged Pullback Forex Trading Strategy is not so hard to master. All a forex trader has to do is look for the moment when the market begins pulling back with two distinct swings or “legs” towards a moving average. The chart below illustrates how to count “price legs.”
In using the strategy, you are taking advantage of the point at which the two-legged pullback and the moving average meet.

The Two-Legged Pullback Forex Trading Strategy works well in most market trends except for the ones in which the trend is very strong because one-legged pullbacks are more common in such strongly-trending markets.

Trend Lines and Channels Forex Trading Strategy

No forex trader will be able to maximize his or her trading opportunities without mastering the use of trend lines and channels in price action analysis. Once a forex trader is able to master the use of trend lines and channels, he or she will find searching for pullbacks in the markets a delightsome experience.
Learning how to use trend lines and channels in looking for profitable trading opportunities enables a forex trader capture complex pullbacks that form on the charts during a typical trading day in the markets.

The Three Bar Pullback Forex Trading Strategy

The Three Bar Pullback Forex Trading Strategy is probably the easiest price action forex trading strategy any forex trader ought to learn. It is not difficult to “see” in the charts and moves in tandem with the price action in the market.
To spot it, a forex trader should watch out for three consecutive candlesticks that buck the prevailing trend in the market.

Support Level Breakout Forex Trading Strategy

There are times when a forex trader monitors a support or resistance level but neither holds so that the trader finds it impossible to use the support and resistance forex trading strategy. The Support Level Breakout strategy is one the trader can fall back on. The strategy will enable the trader trade the break of support that is imminent in the market.
What’s fantastic about the strategy is the fact that the forex trader utilizing it will be able to catch changes from an uptrend to a downtrend in the markets after a major support level breaks, which translates into amazing profits for the trader.

John Hill Trend Line Theory Strategy

The John Hill trend line theory strategy was created by John Hill and utilizes a simple method to find weakening pullbacks inside trends that have formed in the markets.
It entails drawing two trend lines, both of which go on to highlight pullbacks a savvy forex trader might want to trade for handsome profit.

The John Hill Trend Line Theory Strategy demonstrates how the slopes of trend lines can be used in crafting out trading tactics in the markets. What this means is if a forex trader doesn’t want to use the strategy, he or she should at least learn the strategy for its educational value

Horizontal Price Channel Forex Trading Strategy

There are those trading situations in the forex markets when the price action begins to trend or channel horizontally. What this means is that the price action neither trends up or down, but rather moves horizontally across the chart.
The horizontal price channel forms in a market that has been trending for some time. Two opposing forces play out in a market that is moving horizontally: resistance and support. Together, both create the horizontal channel and restrict the price action in it.
Eventually, though, the price action is bound to break out of this channel.

Forex 1-2-3 Strategy

The Forex 1-2-3 trading strategy works best when the 1-2-3 pattern forms in the direction of the prevailing trend in the market. It also works in the direction opposite to that of the prevailing trend in the market too.
The 1-2-3 pattern is easy to recognize and also easy to find on the trading charts.

“1” is the existing trend, “2” is the lower low that formed and “3” is the lower high. Notice that the price action breakout occurs at “2” (at the red line) and continues downwards from there.

The Bull Trap Trading Strategy

A Bull Trap forms in the market when the price action temporarily breaks out from a resistance level and loses its upward momentum and begins to fall back down. The implication is that any bullish trader who placed a trading bet based on a breakout at the resistance level occurring will be trapped as the price action begins falling back to the resistance level and hitting the stop losses that might have been set.
Bull traps are purposefully created by big money traders seeking liquidity for their trades.
The AUX/USD daily chart below shows an example of a bull trap. Again, it’s worth pointing out that a bull trap forms when the price action breaks resistance levels and shoots up, but not for long; before it comes tumbling back down.

As easy as the bull trap trading strategy is, it is not an accurate strategy to use. This is because the bull traps majorly occur during the crossover between the Asian session as it closes and the London session as it opens. The London trading session is usually volatile because London is one of the world’s major financial capitals. When the London session opens as the Asian session closes, spikes in volatility are usually recorded; which in turn drives the momentum of the markets.
Since the London session’s opening is at the end of or the close of the Asian session, most traders in the Asian session will be closing off their open positions and avoiding placing big trade bets in the markets around this time. They do this so as to avoid the uncertainty London’s opening session will bring into the markets during its volatile opening, before it finds its level. All of these cause the range for most currency pairs to tighten up just before the London session begins.
Trading the markets profitably during the London session’s volatile opening is as simple as using a 1-Hour chart to place trading bets. The GBP/USD, EUR/USD, and the NZD/USD are the currency pairs that show the most potential for profits during this time of trading in the markets. There has to be proper risk management techniques in place to mitigate potential losses.

Symmetrical Triangle Chart Trading Strategy

A symmetrical triangle forms on a chart when the slope of the price action’s highs and the slope of the price action’s lows meet at a point on the chart where they together form the shape of a triangle.
As a symmetrical triangle forms in the market, the market is experiencing lower highs and higher lows; which means traders in the market — whether buyers or sellers — are not pushing the price action far enough to create a clear trend in the market.
Think of the symmetrical triangle chart as a drawn game between both buyers and sellers or a type of consolidation in the market.

The Three Black Crows and Three White Soldiers Forex Trading Strategy

Any person well-schooled in technical analysis will understand that the Three Black Crows candlestick pattern signifies a reversal taking place in the market. The Three Black Crows candlesticks form at the peak of an uptrend, and all three candles are long, almost of the same length and bearish. Also, the open price of each candlestick is below the open price of the previous candlestick.

Whenever a security such as a currency pair trades at a resistance level for some time, traders in the market begin to anticipate a change in the price action; either for psychological reasons or because of a fundamental event. The result is that the market will tilt towards the selling of the security. This is what results in The Three Black Crows in the market.
The Three White Soldiers candlestick pattern is the direct opposite of the Three Black Crows candlestick pattern; and it is also a reversal pattern. It forms at the bottom of a downtrend in the market. All of the three candles in the Three White Soldiers candlestick pattern are long and bullish, and are of almost the same length. The opening price of each candlestick is above the opening price of the previous candlestick.


As the price action in the market downtrends, traders in the market begin to anticipate a change in the trend due to psychological reasons or because of a fundamental event. What results is that the market will begin to tilt in the direction of buying up any of the security being traded in it. This is what results in the Three White Soldiers candlestick pattern in the market.
Both patterns — the Three Black Crows and the Three White Soldiers — are used by traders to identify trends in the market. A good strategy is to use the Three White Soldiers as an entry point into the market while the Three Black Crows serve as an exit point from the market.
It is best practice to always use several patterns and indicators in determining trading strategy and placing trading bets in the markets.

Fakey Trading Strategy

The Fakey pattern forms in the market from a false breakout from inside of a bar pattern. The Fakey pattern always begins with an inside bar pattern. There, the price action initially breaks out but then quickly falls back inside the bra pattern; thus creating a false break or a Fakey pattern.
A good way to think of a Fakey pattern is this: Inside Bar + False-breakout = Fakey pattern.
When a Fakey pattern forms inside of the market, a discerning trader will be able to obtain clues as to where next the price action is headed. Learning how to trade Fakey patterns is an important skill a price action forex trader should have in his or her price action trading arsenal.

Bill Wolfe’s Trading Strategy

The Bill Wolfe’s trading strategy is based on Bill Wolfe’s waves, an invention of Bill Wolfe. Wolfe waves are similar to Elliot waves in that they have the 1-2-3-4-5 pattern and form as a series of wedges that are rising and falling. These wedges are the continuation and retracement price actions forming at various reference points; and are used to discern plausible trade entry and exit points on the chart. The various reference points are described below:
Point 1:- The price action wave pattern begins here and traces up to point 2 for a bullish or bearish wave.
Point 2:- Point 2 is the trough, in the case of a bearish wave pattern or the peak, in the case of a bullish wave pattern. Note that point 2 is always higher than point 1 in both cases of a bearish or a bullish wave pattern.
Point 3:- Point 3 forms as a retracement from point 2 and is always lower or higher than point 1 respectively on a bearish or bullish wave.
Point 4:- Point 4 forms as the second trough or peak, respectively, for a bearish or bullish wave pattern.
Point 5:- Point 5 is the higher high for a bearish wave pattern or the lower low for a bullish wave pattern; relative to point 4.
A trader using the Bill Wolfe’s trading strategy has to calculate the “expected point of arrival” or the EPA. It is the point at which the price action breaks out in a direction opposite the wedge pattern formed by the wedges at points 1, 2, 3, 4, and 5.
Note that the tip or the apex of the wedge patterns is formed by the lines 1-3 and 2-4 converging, and this tip or apex must be in the same vertical spot as the EPA.
The tip or apex provides traders with a timeline to the arrival of the price action at the EPA; hence, its name.

Island Reversal Pattern Trading Strategy

Island Reversal patterns form when gaps exist in between a signal day and the days on either side. Island Reversal patterns are very strong short-term signals.
When Island Reversal patterns show up after an up-trend, they imply that the day’s low is above the high of the previous day as well as the day after.
When Island Reversal patterns show up after a down-trend, they indicate that the day’s high is below the low of the previous day as well as that of the day after.

The Bear Trap Trading Strategy

A bear trap forms in the markets when shorts or sell orders show up in the markets as the price of a security trends low, only for the price action to reverse and even shoot higher than its previous level. This counter move of the price action usually entraps unwary forex traders and results in sharp rallies.
To recognize the bear trap, look out for the first wave of buying which usually occurs when the most recent swing high in the market is exceeded. This happens because a sizeable number of shorter-term traders would have placed stops at points a little bit above the market’s recent swing high.
After that, look out for the second wave of buying which unravels in the market as the earlier sellers realize

The NR7 Trading Strategy

As a market unravels during the course of a typical trading day, it experiences unique, quiet moments or moments of calm; just before a storm breaks out. The breaking out of the storm can be profitable for any forex trader who recognizes the opportunity for what it is — an opportunity to make a highly profitable trade.
The NR7 trading strategy helps forex traders recognize the calm before the storm.
NR7 is the acronym for “narrow bar 7.” On a trading chart, it is the bar that has the smaller range when compared to the six bars that formed before it. Its narrow range is a market contraction happening before it expands.

The chart’s features are listed below:
⦁ The price action came down from the region above the EMA in a series of eight bearish bars that followed each other.
⦁ Recollect that seven bearish bars flowing each other usually herald the arrival of an NR7 bar. In the chart above, the seven bars that pinpointed the NR7 bar were all below the EMA, which shows that the bearish momentum was sustained.
⦁ Notice that the NR7 bar closed higher than its open; and that it formed a mini triple top in conjunction with the two bars before it. Seeing that the low of the NR7 bar broke, the right strategy here is to short the market.
⦁ Notice also that the price action came back up to test the trade’s break-even level. The price action dropped considerably because of the failed bullish breakout of the doji NR7.
⦁ This doji NR7 is a good example of why no one should use the NR7 trading strategy to trade reversals without first looking for confirmatory signals from other indicators.

The NR4 Trading Strategy

The NR4 trading strategy plays out when a trading day’s high-to-low price range is narrower; compared to the price range of the previous three trading days.
The NR4 trading strategy has a lot of advantages for the savvy forex trader:
⦁ It is a price action trading system that is simple and easy to set up;
⦁ It is a trading strategy that is basically unforgettable;
⦁ It requires only a few minutes of any trader’s time in any trading day, to check if the setup has formed or not. Whether or not it has formed, a trader can always place a pending order on the markets and walk away to attend to other things;
⦁ The NR4 trading system has the potential to stop any forex trader from over-trading in the markets;
⦁ The NR4 trading system’s stop loss is tight; a fact that increases any trader’s risk-to-reward ratio should the trade go as planned.
⦁ Should a forex trader choose to trade the NR4 system using a daily chart, there is a profit potential of as much as 100 to 300 pips or more, depending on the strength of the trend in the market and how long the trader allows the trade to play out before exiting the trade.

Weekend Gap Trading Strategy

The basis for the Weekend Gap trading strategy is very easy to understand; making the strategy an easy one to implement. Though forex markets are reputed to be open round the clock every day, the reality is that the markets shut down on Friday afternoons and will not reopen until Sunday evenings.
While the markets stay closed over the weekend, it is possible that several news announcements or world events that can affect the prices of currencies on the markets might have taken place and moved the prices.
Savvy forex traders trade the weekend gap by placing trading bets based on the expectation that the currency pairs’ opening prices for Sunday would, in the least, return to their Friday closing values.

Inverted Hammer Trading Strategy

An inverted hammer forms on the chart when a candle has a real body that is small, an upper wick that extends and little or no lower wick. The inverted hammer usually shows forth at the bottom of a downward trend of a price action. It signals a potential reversal of the price action’s downward trend.
The upper wick of the hammer that extends shows that bullish trades are being placed on the markets and the currency pair price is going up.
The subsequent price action after the inverted hammer shows up will validate or nullify the trend.

The inverted hammer and the shooting star have similar physical characteristics which makes it possible to confuse one for the other. The difference between the two is that the inverted hammer appears at the bottom of a downward trend while the shooting star appears at the top of an upward trend

The Third Strike trading Strategy

The third Strike trading strategy is premised on the fact that a consistent downward or upward trend in the market signifies a profitable trading opportunity.
For example, for a market trending downwards, a first low will be made, then another low will form that will be lower than that formed first; and finally a third low lower than the previous two lows will form. This signals and confirms that the bearish trend in the market has come to stay.

The Fibonacci Trading Strategy

The Fibonacci trading strategy is based on Fibonacci retracements. Price action in the markets retrace around areas of support (where the price action stops going higher) and resistance (where the price action stops going lower). Thus, a Fibonacci retracement is a potential retracement or reversal of the price action of a financial asset.
When retracements are plotted out on the trading chart, they are done using horizontal lines which show areas of support and resistance at key Fibonacci indicator levels just before the price action proceeds in its original direction. The horizontal lines or levels are drawn up by drawing a trendline between two extreme points and then divvying up the vertical distance at key Fibonacci ratio levels: 23.6%, 38.2%, 50%, 61.8%, and 100%.

Gravestone Doji Forex Trading Strategy

The gravestone doji forms as a bearish reversal candlestick pattern when a trading session’s open, low, and closing prices are all near each other with a long upper shadow. The long upper shadow indicates that a bullish advance that was underway at the beginning of the trading session was overrun by bearish trades by the close of the session.
The gravestone doji pattern is indicative of an imminent bearish reversal in the market. Understand that the open, low, and closing prices in the gravestone doji pattern don’t have to be the same for the pattern to be valid; rather, there should be a relatively small tail for the gravestone doji pattern to be valid.
The gravestone doji results when bearish trades in the market attempt to push the price action to new highs over the session but the bulls push the price action to near the open by the session close. The long upper shadow indicates the bullish trades losing momentum in the market.

Resistance Level breakout Forex Trading Strategy

Resistance level breakouts occur when the price action moves up and is aiming for brand new highs or when the price action moves downwards and is aiming for brand new lows.
Certain price action patterns will show the likelihood or not of these price action patterns showing up on the charts. More often than not, these indicative price actions are hidden in the daily trades; so a savvy forex trader will have to watch the markets in a lower time frame in order to be able to see these patterns.

New York Breakout Forex Trading Strategy

The New York breakout trading strategy, as the name implies, is executed in the first few opening hours of the New York markets; specifically, between 1:00 p.m. and 3:00 p.m. GMT. The strategy aims to capture the big moves the New York market opens with.
Just before the New York market opens, the London market would have started fizzling out while traders who intended to trade on the New York market would just be “waking” up and preparing for their trading sessions. Once an overlap between the London and New York sessions occur, the price action in both markets are very strong and any trader who places trades in the direction of the markets’ movements is bound to profit from those trades.

Ross Hook Pattern Forex Trading Strategy

The Ross Hook pattern forex strategy is a slight variation of, or better still, a build-up on the 1-2-3 pattern.
Recall that the 1-2-3 pattern formation is basically a reversal pattern. The additional information the Ross Hook pattern strategy works with is the fact that the 1-2-3 pattern has two “types” — the “1-2-3 high” and the “1-2-3 low” formations.

The “1-2-3 high” formation will appear on the trading chart at the tail end of an uptrend in the market. It is a bearish or “sell” signal, as it announces the imminent downward movement of the price action in the market.
On the other hand, the “1-2-3 low” formation shows up on the trading chart at the tail end of a downtrend in the market. It is a bullish or “buy” signal, as it announces the imminent upward movement of the price action in the market.

20 EMA Bounce Trading Strategy

As can be deduced from its name, the 20 EMA Bounce Trading Strategy utilizes a 20-period (H1 or H4) Exponential Moving Average (EMA) as a “bounce line” for currency pair prices. The EMA is similar to the SMA (Simple Moving Average), except that it is more accurate and reacts faster to recent price changes in the markets because its setup gives more weight or importance to recent price data.
The 20 EMA Bounce Trading Strategy should be used only in markets where a clear trend has been set.
In a downward trend, the price action will always be below the 20 EMA line. If the downward trend is strong enough, as the price action tests the 20 EMA line, it will eventually move away from it and continue its downward trend.
Something similar happens in an upward trend. In it, the price action will always be above the 20 EMA line. As the price action tests the 20 EMA line, it will eventually move away from the line and continue its upward movement; provided that the upward trend was strong enough in the first instance.

The Demark Forex Trading Strategy

This Forex trading Strategy is one of those price action trading systems with an acceptable risk-to-reward ratio, and pays off handsomely if a trade goes as expected. The strategy centers around trading trendline breakouts; but with slight conditionalities.
One, the trendlines are drawn using the latest highs (peaks) and lows (troughs).
Two, any timeframe can be utilised in drawing the trendlines, but it is advisable to use a minimum timeframe of 15 minutes;
Three, the strategy works for any currency pair;
Four, No forex indicator is required for the strategy to work well.

Head and Shoulder Chart Pattern Forex Trading Strategy

The Head and Shoulder pattern forms on the charts whenever there is an imminent reversal in the market. The pattern forms first with a peak (a shoulder), then a higher peak (the head) and then a lower peak (the shoulder).
The Head and Shoulder trading strategy entails drawing out the “neckline” by drawing a connecting line joining the lowest points of the two troughs on the chart. This neckline can slope upwards or downwards, but generally, the downward-sloping line provides a more reliable trade signal.

The Railway Tracks Chart Pattern Forex Trading Strategy

The Railway Tracks Chart Pattern Forex Trading Strategy works by a forex trader analyzing two candlesticks that have formed beside each other, one of which must be a bullish candlestick while the other must be a bearish candlestick; and both of which must be of similar lengths.
Seen together, the two candlesticks look like railway tracks, hence the name for the strategy. Two types of the railway tracks form on forex charts. The first is bullish and the second is bearish.
Railway tracks form as trend reversal patterns.

Multi-Timeframe Trading With Trendline Trading Strategy and 123 Pattern

The Multi-Timeframe Trading With trendline trading strategy is based on using the 1-2-3 reversal pattern that forms on a trendline as a buy or sell signal. Vic Sperandeo came up with the strategy and the strategy is sound because it makes use of the market’s very mechanics.
The Multi-Timeframe Trading With Trendline trading strategy is a great trading tool for risk-averse forex traders who might not enjoy trading off the bounce of the trendline trading system just yet but do need a definitive 1-2-3 breakout pattern on their charts for them to enter into a trade. The strategy provides for obvious areas for stop losses and trade entries determined by areas of support and resistance that show up on the charts.

Third Shortest Candlestick Forex Swing Trading Strategy

Certain trading days come when short or very short candlesticks turn up on the charts. This happens because the market may initially begin with an upward trend that appears strong, but soon starts to slow down. The same concept plays out in a market that begins with a downward trend that appears strong, but soon begins to lose its downward momentum as one short bearish stick after another begins to show up on the charts.
The third shortest candlesticks forex swing trading strategy takes advantage of the above-stated fact about up-trending or down-trending price actions in the forex markets.
What we are looking out for, in using this strategy, is for a loss of momentum or the slowing down of the market. We can only see this in a 10-hour or higher timeframe.
The trade is placed when the “third” very short bullish or bearish candlestick shows up on the charts. Locating this “third” is as easy as looking out for two prior candlesticks that are “long,” that is, their ranges or the difference between their “highs” and “lows” are much.
The third shortest candlestick is the signal to enter the trade.

Frequently asked Newbie Questions

If you are just getting going then you probably still have a lot of questions about day trading, spread betting, trading risk management, money management We’ve compiled a list of possible questions on Forex trading that you might have and concise answers. This guide is perfect for beginners(and experienced traders) and will help you better understand Forex trading and decide if it is right for you.

There are many benefits of Forex trading. It is a great way to supplement your income. It is also open 24 hours a day for five days a week, so that means that you can trade a currency pair when you want. It doesn’t matter if you are on holiday or it is the middle of the night. Your mobile phone or laptop is all you require as a new investor to trade Forex. The prices in the Forex market are relatively stable compared to the stock or equity markets. The Forex market also has high liquidity levels. This is because of the large sums of money available for Forex trading; about $5 trillion is traded every day.

The basic principle of Forex trading is the buying and selling of another currency and waiting till you are in a profitable position before you exit. This is a huge advantage for entry-level traders because you can completely focus on two currencies as opposed to being overwhelmed by all the options available on the stock markets.

Getting started with Forex trading is as simple as opening an account on an online trading platform. Fill out the information required on the platform form, wait for verification; your trading account is ready to soon as it is open. You will need to credit your account to begin trading, of course.

Please note, it doesn’t matter how small or large your trading capital is, always put a trading plan in place before you trade.

Forex, (the short form for ‘Foreign Exchange Markets’) is a term that used to describe the international trading market for selling and buying different currencies.

Forex trading has grown over the years and has a total value of over $5 trillion. For seasoned investors, the opportunity to get a piece of the largest trading market in the world is something not to be missed.

Entry-level traders also love the fact that they are not required to pay a commission on the trade profits. And as a bonus, you can access the market from wherever you are in the world. You can do a single trade or scalp with lots of trades if you have a low bid price to ask price spead.

As with other types of investment and stock trading, Forex trading comes with its own set of risks; especially when you are starting out. It is often considered more risky than conventional investment and trading options because it is leveraged trading. What this means is that you can use more money to trade than is available in your account.

The Forex market is the largest and most liquid financial market in the world. It has a daily trading volume of about $5.3 trillion. The fx market is also the only market that is open 24 hours a day. There are over 870 currencies to trade, which makes it 12 times larger than the futures market and 27 times larger than the equities and stock markets.

With leveraged trading, you can borrow the money you intend to trade with from your broker. You only have to deposit an upfront security fee just in case you incur any loss. What this means is that traders can invest small amounts but stake on bigger trades using the limited capital.

This is probably one of the most important skills a Forex trader needs. Making the decision to exit or enter a market must be arrived at with objectivity; devoid of emotion. A good way to do this is to consider price levels or the technical formations on your chart before making your decision.

You can also plan out your entry and exit strategy/ plan in advance. For beginners, it is always advisable to keep your trades small and increase your trade volume gradually or commit to a trade volume little at a time for the duration of a particular period. If you do this, you can mitigate your risk and the losses you might incur from a bad exit or entry position.

A market spread in the Forex market is the difference between the bid price and the asking price in a currency pair . This difference is calculated in pips and is used by brokers to determine the profit margins for a particular transaction.

Most beginner traders start with currency pairs like USD/GBP. Try to learn how to trade one pair rather than trying to understand what affect the exchange rate for all. Build up your knowledge with a focused approach and develop strategies that work. You might then want to maintain the base currency you know and look at another currency to pair it with.

There is no brick and mortar location for the Forex trading market. However, the largest trading centres can be found in London, Singapore , Tokyo, Hong Kong, and New York. Forex trading happens through electronic systems or over-the-counter markets where banks, licensed brokers and traders are connected.

This is why Forex trading takes place 24/7 (Monday to Friday), because a Forex market centre is always open somewhere.

There is no better time than now! Unlike conventional stock and equity markets, the Forex trading market is open for 24 hours a day (five days a week). So you can begin trading at any time of the day or night from your mobile phone or laptop.

This is made possible because of the different time zones in different countries. The perfect trading time varies from currency pairs, so you are not limited by the traditional 9-to-5 schedule of the DFW or NASDAQ exchanges. Which makes Forex trading ideal for anyone even those who work a 9-to-5 office job and cannot run trades during work hours or a parent who can only trade when the children fall asleep.

A pip is the unit used by Forex traders to measure the movement of currency when trading. For example, for EUR/USD, one pip is 0.0001.

As a day trader doing lots of trades you want a small difference between the bid price and the ask price. A wide spread will mean there is a high risk of trades ending unprofitable. When you are trying to take a few pips dozens of times a day you need single trades to be cheap to enter. The best Forex broker for day trading may not be the best for trading strategies with a longer investment horizon, or if you are trading market data.

Swing trading is trading oscillating price movements of currency pairs in order to achieve a profit. Swing trading is normally informed by technical analysis and trades are held from a few days to several weeks.

Stop Loss is a trader management technique that is used to forecast the ideal time for you to exit a losing trade so you do not incur more losses. While losses are a natural occurrence in Forex trading, stop loss allows you to control the situation by providing you with the opportunity to make a quick decision about what to do when you are losing.

You can set parameters for your stop-loss plan by setting a limit of the amount you are willing to lose on your accounts. Or you can use visible volatility, prevailing market conditions, resistance and support levels on charts, or a time limit.

If you are a beginner in Forex trading, we recommend that you get professional training and advice before including a stop-loss strategy in your plan.

Binary options are fixed rewards and loss contracts in which the trader predicts when a currency will rise or fall within a practical timeframe. So you’re totally aware of how much money you get back if your prediction pans out or how much you’d lose if your prediction doesn’t.

Forex trading and binary options are similar because they can be started with a small capital and trades can be done online. The major difference between them is in how much profit you can get over time.

Trading with the binary options would require very accurate predictions in order for you to make a significant amount of profits. Binary options are also expensive in the long run. Forex trading, however, gives you the freedom to determine your stop-loss orders and profit targets. What this means is that you can still earn a profit even when most of your predictions are apparently incorrect.

A contract for difference (CFD) is a contract agreement is where you are paid for every pip that the currency you are trading has moved in your favour. If this doesn’t happen, then you would have to pay.

The are so named because every time you close on a position, the profits you acquire is the difference between your opening and closing price. This difference will then be added or subtracted from your trading account. Please remember, you do not really own the currency you buy physically or virtually so you do not have to deliver the currency that you trade.

Spot trading, however, requires the actual exchange of currencies by an electronic system or physically. What this means is if you buy or borrow a currency you would either receive interest or be required to pay via real currency notes.

Technical analysis is a technique that requires the use of charts as a tool for generating informed trading decisions. By analysing the volume and price movements provided by this chart, Forex traders can predict how weak or strong a particular currency is and prepare for future or movements.

There are a lot of useful learning materials that are available online and most of them are free. You also have access to current real-time market information from sources such as Daily Effects or Bloomberg.

While basic information on Forex trading or even technical analysis techniques and advanced fundamental analysis advice is readily available, please check to ensure that the source of this information can be trusted. If it comes from a financial service provider, then check to see if they are licensed.

You can also get familiar with the trading process and techniques that work by practising with play money in the demo accounts offered by some trading platforms. This will help build your skills and confidence before you attempt to make real money. This way you will avoid losing money as you move through the learning pitfalls towards an intermediate and expert trader.

Another alternative is for you to get training from experts traders with a proven track record of market successes and years of experience.

With conventional stock and equity markets, most investors who trade in futures and stock options would require a broker to act as an agent in the transaction. The broker is taxed with taking the order to an exchange and executing it according to the customers’ requirements. They then pay the broker a commission for buying and selling the trades on behalf of the customer.

Forex trading market however doesn’t have commissions because most investors do the trading by themselves. As FX is a principal only market, Forex trading companies are dealers not brokers. Dealers offset the market risk by serving as a third party to the investor’s trade. They do not require a commission but make their money through the market spread.

With FX, the investor cannot attempt to sell or buy in on an existing bid as is commonplace in most exchange-based markets. There is also no additional fee or commission to be paid by the investor once the spread is cleared. So every single profit acquired goes to the investor.

Dealers are required to match and surpass the market spread and this makes gulping difficult in Forex trading.

A Forex trading plan can not be proven by some short term profits. To guarantee long-term success, results must be significant and consistent for a long period. Please note, a strategy that has only worked a couple of times is just a theory. If your trading account shows profit on a base currency with a second currency, but not on other currency pairs, or when you trade support and resistance levels but not candlestick patterns, then it may be that you just need to refine what you trade to have a profitable strategy.

There are lots of Forex books written on trading style, candlestick analysis, stop loss limits and futures contracts. Individual investors need to understand their own trading psychology and work out what works for them. That is the best way to develop a day trading strategy, to avoid high risk short term trading and to work with leveraged products to achieve gain capital.

Forex trading doesn’t take place in regulated markets as opposed to futures stock or option currency trading. It is also doesn’t have a central governing body. Therefore, there are no guarantees on trades and it has no panel registered to adjudicate disputes. All trades by members are made on credit agreements. What this means is that business in Forex trading is physically conducted over are a handshake.

For new investors who are used to the structure of exchanges like the Chicago Mercantile Exchange (CME) or the New York Stock Exchange (NYSE), the arrangement in the Forex trading market is weird. But you can be assured that this arrangement works.

Self-regulation has proven to be an effective tool to control the markets. This is because participants in the FX trading markets are forced to cooperate and compete at the same time . As an added bonus, reputable retail FX dealers in the United States are members of the National Futures Association (NFA) and are bound by an arbitration agreement in the event of disputes. If you intend to trade currencies using a retail FX dealer then you should only use member firms that are reputable.

Another unique feature of the Forex trading market is the ability to shut down a pair that is on a downward spiral at will. All you need to do is set a stop loss limit. There are no opt-out rules in Forex trading because there is no stock. You are also not limited by size as in futures. So you could hypothetically trade or sell a $100 billion dollars’ worth of currency if you have the requisite capital.

A trader is also free to act on information in any way they deem fit and we would not consider this insider trading like in most conventional mark trading markets. For instance, if a trader finds out from a client that knows the governor of the Bank of Japan or Bank of England, that the BOJ’s intends to raise its rates in the next meeting, the trader can buy as much yen as he wants.

In fact, because there is no such thing as insider trading in the FX market, European economic statistics like the German employment figures are often leaked days before the official release date and traders act on this information without being sanctioned.

This doesn’t mean that the Forex trading market is the jungle of the finance world but it is the most fluid and liquid market in the world (24 hours a day) and rarely has gaps in price.

Because of its sheer share size from North America, Europe and Asia, it is also the most accessible currency market in the world. Therefore, it produces substantial data that can predict future price movements.

Forex trading doesn’t take place in regulated markets as opposed to futures stock or option currency trading. It is also doesn’t have a central governing body. Therefore, there are no guarantees on trades and it has no panel registered to adjudicate disputes. All trades by members are made on credit agreements. What this means is that business in Forex trading is physically conducted over are a handshake.

For new investors who are used to the structure of exchanges like the Chicago Mercantile Exchange (CME) or the New York Stock Exchange (NYSE), the arrangement in the Forex trading market is weird. But you can be assured that this arrangement works.

Self-regulation has proven to be an effective tool to control the markets. This is because participants in the FX trading markets are forced to cooperate and compete at the same time . As an added bonus, reputable retail FX dealers in the United States are members of the National Futures Association (NFA) and are bound by an arbitration agreement in the event of disputes. If you intend to trade currencies using a retail FX dealer then you should only use member firms that are reputable.

Another unique feature of the Forex trading market is the ability to shut down a pair that is on a downward spiral at will. All you need to do is set a stop loss limit. There are no opt-out rules in Forex trading because there is no stock. You are also not limited by size as in futures. So you could hypothetically trade or sell a $100 billion dollars’ worth of currency if you have the requisite capital.

A trader is also free to act on information in any way they deem fit and we would not consider this insider trading like in most conventional mark trading markets. For instance, if a trader finds out from a client that knows the governor of the Bank of Japan or Bank of England, that the BOJ’s intends to raise its rates in the next meeting, the trader can buy as much yen as he wants.

In fact, because there is no such thing as insider trading in the FX market, European economic statistics like the German employment figures are often leaked days before the official release date and traders act on this information without being sanctioned.

This doesn’t mean that the Forex trading market is the jungle of the finance world but it is the most fluid and liquid market in the world (24 hours a day) and rarely has gaps in price.

Because of its sheer share size from North America, Europe and Asia, it is also the most accessible currency market in the world. Therefore, it produces substantial data that can predict future price movements.

Currency carry trading is one of the most popular trades in the FX markets. It is practised by both small retail speculators and large hedge funds. The carry trade is based on the associated interest that every currency in the world has. This interest rates are short-term and are set by the central banks of these countries; the Bank of England in the United Kingdom, the bank of Japan in Japan, and the federal reserve in the United States.

The carry trade concept is simple. A trader will go long on a high interest rate currency, making a purchase using a currency with low interest rate.

For example, in 2005, the NZD/JPY cross was a great pairing. New Zealand saw an influx of commodity demand from China and an increase in its housing market rate; this directly translated to an increase of its rates on the FX markets to 7. 25% and it stayed at that point while Japanese rate was at a steady 0%.

A trader who went long on the NZD/JPY would have gained 25 base points in profits alone. On a 10:1 leverage base, it would have produced a 7 to 2.5% annual return of interest rate differentials on the carry trade of the NZ/JPY with no appreciation from capital.

This example paints a better picture of why the carry trade is very popular in the FX market. Please be advised, the carry trade isn’t stable and is susceptible to a sudden downward spiral. We know this in the FX market as currency carry trade liquidation.

It happens when many speculators decided that a particular carry trade no longer has any future potential. Thus, every trader would seeks to exit their position immediately and once there are no longer bids, the profits on industry interest rate differentials are not enough to offset capital losses.

This doesn’t mean that you shouldn’t run a carry trade but it is always best to position yourself at the beginning of the cycle, this would allow you ride the movements of interest rates differentials.

The major liquid currency pairs that a Forex brokerage firm will trade in are divided into four majors and three commodity pairs. There are also exotic pairs, bitcoin and some other financial instruments available on some platforms.

The majors include

USD/JPY (Dollar/Japanese Yen)

EUR/USD (Euro/Dollar)

USD/CHF (Dollars/Swiss francs) and

GBP/USD (British pounds/Dollar)

The commodity pairs include

NZD/USD (New Zealand dollar/United States dollar)

AUD/USD (Australian dollar/United States dollar)

USD/CAD (United States dollar/Canadian dollar)

These currency pairs account for over 95% of speculative trading in the Forex market alongside currency pairs such as GBP/JPY, EUR/JPY, EUR/GBP and so on.

Given the limited number of trading tools, there are only 18 pairs and crosses that are actively traded. This makes the Forex market more concentrated than the conventional stock market.