3. Order Block Strategy

This strategy is popular with large institutional traders and banks. It’s great for reading the market. As with most strategies in this guide, it is an advanced forex trading strategy.

So, you’ll need to understand the working mechanisms to use it effectively. Think of an order block as an area of price where it’s settled before it can start momentum. To be more specific, before beginning an impulsive momentum.

Big players in the market will often accumulate and prepare orders. This is done to set momentum. In this case, a retail trader needs to figure out the footprint. Traders can read order blocks and follow them.

4. Scalping

A fact that surprises many people is that many successful forex traders are scalpers. If you do it right, you can earn quite a lot of money by scalping. The keyword to take note of here is doing it right.

You’ll aim to make a very short-term trade when you follow a scalping strategy. It’s usually done with high leverage for a few PIPs. Timing is also important when scalping. Executing this strategy with an exciting news release or following an important event is best. You’ll need to analyze the market well to perform it correctly.

But you need to be careful. Scalping is extremely risky. In addition, it’s difficult to justify the payout regarding the risks. Therefore, we don’t recommend even advanced traders make scalping their primary strategy.

Advanced scalping requires bottom-top analysis. It’s essential to keep an eye on high-timeframes traders. That way, lower timeframe traders can match trading activity to increase the chance of profitability.

5. Ichimoku Cloud Strategy

Most trading platforms have the Ichimoku Kinko Hyo indicator available for free. Many traders ignore it. But it can be used to make successful traders with the right knowledge. In essence, it’s a time zone.

It works as a resistance or support zone. In addition, there are two parts to the Cloud – Span A and Span B. You can assume that the market is bullish if it’s above the cloud and vice versa.

6. Price Action and Context

In this strategy, traders follow big-time investors and traders. It removes a lot of guesswork and makes things simpler. You need to predict a currency pair’s movement. As you might imagine, this is easier said than done.

Since financial intuitions and banks dominate the forex market, there’ll be some signs left behind for any price movements. Traders then can study these signs and speculate on future activity. Price movements can also be speculated based on present and past data.

How To Create the Right Strategy for Forex Trading

Understanding the fundamentals of a good strategy will make you a better trader. You’ll be able to identify good and bad strategies.

Trading strategies can vary a lot. One could be optimized for a specific metric, while the other could be optimized for a completely different one. Here are some important factors that go into designing a successful trading strategy:

Step 1: Figuring Out the Markets

Your first step is to determine which market you want to trade. In forex trading, this will be the chosen currency pair. It isn’t only about knowing which pairs you want to trade.

To create a successful strategy, you’ll need to understand the mechanics of the given pair. If you can read the pairs well, you’ll be well on your way to crafting a successful strategy. Although, we wouldn’t necessarily say this is the easiest part.

It’ll take time and experience to get good at it. However, the following steps have more moving parts you must remember. So, let’s dive into that.

Step 2: The Position Size

Second is the position size. The position size refers to the number of units invested. It isn’t always viable to go for the largest position size. You need to take your account balance and risk tolerance into consideration.

You’ll hear the term position size in many kinds of trading. But it’s more important and widely talked about in forex trading. You should consider trade, account risk, and proper position size to determine the right position size. Let’s look at each of them.

Account Risk

Traders need to calculate the account risk first and foremost. It’s best to avoid risking more than 2% of your account balance on one trade. You’ll risk less than this if you’re a fund manager.

Trade Risk

After account risk comes trade risk; this is where the stop loss order comes in. A stop-loss order is a simple instruction to buy or sell when the price reaches a specific price. This price is called the stop price.

Proper Position Size

After you’ve assessed your account and trade risk, you’ll have a good idea of what you can risk. You’ll divide the account risk by trade risk. That’ll give you the proper position size.

Step 3: Determining Entry Points

Entry points are the initiating price. This is the price point where a trader will start a position at. This is an essential aspect of crafting a successful strategy.

You need to have a good entry point for a successful trade. It helps minimize risk and stops traders from trading forex based on emotions.