Successful traders worldwide are using many profitable trading systems to trade forex. If you’re unsure which strategy to use, you can practice and backtest, then determine which one works best. Here are nine profitable strategies you can choose from.
1. Support and Resistance
Support levels are key levels formed when falling prices stop, change direction, and begin to rise. Support is often viewed as a “price floor” that is supporting or holding up prices. Professional traders buy at support zones because the increase in buying pressure at these critical levels makes prices likely to go up.
A resistance zone is a price level where rising prices stop and begin to fall. Sellers come in at resistance levels and take the prices lower. Professional traders sell at resistance levels because the selling pressure at these levels makes it likely that prices would go down.
2. Breakout Strategy
A key concept of technical analysis is that its role is reversed when a resistance or support level is broken. If the price falls below a support level, that level will become resistance. If the price rises above a resistance level, it will often become support. When a price breaks out of a support or resistance level, it’s called a breakout.
This usually leads to significant price movements. Breakouts can also occur when the price breaks out of a consolidation range. Once the market breaks out, that provides a good buy or sell entry. You can enter after the breakout candle closes or after the market retraces. The entry style depends on your risk appetite.
3. Fibonacci Strategy
The Fibonacci strategy is a forex trading indicator that helps to improve your entries in a trending market environment. The forex market moves in impulsive and corrective moves. After an impulse, the Fibonacci strategy helps you identify key levels from which the price could continue a new impulse.
Plot the Fibonacci tool from the major swing low to the major swing high in a bullish market trend. In a downtrend, we can use the Fib retracement tool similarly. First, you need to identify the major swing high and low. Then, draw the fib tool from the swing high to the swing low.
4. Moving Average Strategy
Moving averages are dynamic support and resistance tools. You can use different moving averages depending on the market trends. A simple moving average (SMA) is an indicator that forecasts price movement by taking an average of previous market prices at specific time intervals. It forecasts price behaviour by considering the mean of the past price data as a determinant of future price.
The moving averages also show the market trend and the momentum of the trend. You can buy or sell once the price trades to a moving average, but make sure you’re trading in line with the market trend. You can use moving averages alone or in confluence with other indicators to build a solid trading plan.
5. The Relative Strength Index
The relative strength index is an indicator that can be used for scalping, day trading, and swing trading in different market conditions. It helps traders determine the best prices to buy or sell by identifying the overbought and oversold market conditions. You can buy when the market is oversold and sell when the market is overbought.
6. Moving Average Convergence/Divergence
The moving average convergence/divergence shows the relationship between two moving averages of a security’s price. The MACD indicator is a popular price indicator used for day trading and forex trading. It measures the difference between two exponential moving averages and plots the difference as a line chart.
When the MACD line crosses above the zero line, the market is bullish, and you can look for buying opportunities. WheConversely, whene MACD line crosses below the zero line, and it’s bearish.
7. Chart Patterns
Chart patterns are price action presentations that can be used to predict the direction of price movement. Like other technical analysis tools, chart patterns do not guarantee that a specific outcome will be obtained. Instead, they show what the most likely outcome is. They can be used to predict the reversal or continuation of a trend.
8. Candlestick Patterns at Key Levels
Candlestick patterns are price action indicators. They show the interaction of buyers and sellers in the forex market at different time frames and intervals. You can trade by examining candlestick patterns that form at key levels in the forex market.
Reversal patterns like the Doji can be used to predict when the dominant trend is about to change.
9. Moving Average Crossover
This occurs when two moving averages cross each other, signalling a change in the forex market trend. The moving average crossover occurs when two different moving averages intersect. It can be used to predict reversals. This strategy can be applied to all time frames and currency pairs. You simply have to execute trades when the moving averages cross. This can be applied to both bullish and bearish scenarios.
Ultimately, the best trading strategy is whichever one suits your style of trading and meets your requirements in terms of risk-to-reward ratio and win rate.