Trading Strategies

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The importance of a forex trading strategy

Specific trading strategies should be used for the chosen currency pair for which they were created, because they depend on the ratio of the certain currency pair. However, this does not mean that other currency pairs won’t benefit from the chosen strategy, it is simply advisable for traders to ensure they analyse the strategy further before applying it to different currency pairs.

The main task of any forex trading strategy is to minimize the impact of external factors on the forex trader and to organize the trader’s activities. The development of a trading strategy can even be compared with the development of a business plan for a specific project.

When developing your own trading strategy or improving an old one, it is important to remember these rules:

  • Any trading strategy has a share of subjectivity, it does not guarantee success and can also work against you
  • Each forex trading strategy should be compatible with a trader’s style
  • 95% of trading failures are caused by lack of psychological stability – the creation of a forex trading strategy is designed to solve this problem.

We hope we helped you understand a little bit more about trading and gather some ideas for developing your own personal trading strategy which reflects your style and aspirations. Traders can combine different methods or develop even their own indicators and trading robots, because there is no limit in different variations.

Trading strategies

A trading strategy in forex is basically a defined set of rules for trading. Strategy largely affects the long-term success of a forex trader, as trading without a strategy too often results in only short-term profit and soon can be followed by a collapse. That is why Vipro Markets offers its customers the ability to learn and choose among the most successful forex trading strategies, enabling them to select the one that fits their trading style the most.

Support and resistance

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Trader defines a flat market with clear support and resistance levels. Trading is within the range until price breakout. Stop loss is put outside the channel.

  • Timeframes: All, preferably from 1H.
  • Type: no trend (flat)

Breakouts

When price trades in a range for some time, sooner or later we’ll see a breakout either up or down. Usually the breakout is very fast and volatile, so it is possible to open a trade in the same direction. Stop order is usually above the support line or below the resistance but not too close to avoid common movements and flat widening. To be sure, it is always wise to wait until at least one price bar closes below/above the flat-range line.

  • Timeframes: All, preferably from 1H.
  • Type: no trend (flat)
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Moving average

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Perhaps one of the most popular strategies. Please note that a trader will get much more signals trading on smaller time frames which puts more emotional pressure. Any instrument can be chosen and any period can be set for the moving average. Back-testing on history (at least 1 year period) is required to define if chosen parameters are correct. Stop loss is usually set above/below the moving average but not too close.

  • Timeframes: All, preferably from 1H.
  • Type: directional (trend)

Oscillators

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Oscillators measure strength/weakness of a selected instrument. Oscillators work well during flat markets when there are no trends. Traders can choose an instrument and indicator’s parameters according to personal needs and back-testing results. Oscillators point out good entry points whenever the market is oversold or bought. It is wise to use a fixed stop loss when working with oscillators to avoid bigger losses if a breakout should happen.

  • Timeframes: All, preferably from 1H.
  • Type: no trend (flat)

Technical formations and Japanese candlesticks

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History tends to repeat itself, and so are the visual formations on the charts as well as price-bar combinations. Listing all the possible combinations is not the purpose of this topic; we would just like to give you an idea where one could start. There are many visual formations that can be used: “triangles”, “flags”, “head and shoulders”, as well as countless price-bar combinations consisting of one or several candles.

  • Timeframes: All, preferably from 1H.
  • Type: both directional and flat