Are you looking for an efficient forex strategy to make a profit but don’t yet have a defined and profitable trading strategy? In this article, we will discuss two Forex strategies that can improve your trading and help you develop your own trading style.
But before we begin, let’s look at a brief introduction to explain what a forex trading strategy is in general.
Typical Forex trading strategy includes a set of analysis tools used by intraday currency traders to determine their buying or selling decisions at a specific time. Traders generally incorporate various signals into their strategies to help them make buying or selling decisions. Therefore, at this point, we cannot say that there is one particular type of strategy that is the best option, as there are several kinds of strategies that provide a wealth of alternative strategies to help you succeed in this market.
Remember, although there are a lot of trading strategies, you should choose a strategy that fits your needs and purposes. The trading strategy should not be too complex to understand or follow, but should be simple and applicable manually or automatically, in order to be profitable in this world. In 2012, Bruno Iksil was nicknamed “The London Whale” because he lost no less than $6.2 billion through the use of an overly complex trading strategy involving derivatives.
Fortunately, we have plenty of free training materials to help you. In addition, there are a lot of automated and manual negotiation strategies out there for you to choose from.
One of these simpler (and therefore one of the most successful) strategies is based on an indicator, the simple moving average (SMA).
SMA Forex Trading Strategy
SMA’s Forex trading strategy aims to provide the highest possible return on the amount of risk assumed. When used correctly, it can be one of the most successful forex trading strategies. Forex moving averages measure the average value over a specific time period to give traders a better view of when to buy and sell a currency pair.
For example, if a 12-period SMA defined in a 15-minute chart is defined, it can be used to generate signals. For example, if the price of the currency pair exceeds the moving average upwards, it can be taken as a buy signal. On the other hand, if the price of this currency pair crosses below the simple moving average of 12 periods, it can be taken as a selling signal.
This Forex strategy is designed for beginners because it is very easy to understand and can be used in almost any season and with most financial instruments. In addition, through this SMA trading strategy you can start developing your own trading system. Simply add more indicators you know and you will have more tools to base your decisions. Remember that you must always test your strategies with a demo account first before taking the step to real and keep it simple don’t get carried away by the wide list of indicators you can use such as: the RSI Indicator, the ATR Indicator, the ADX Indicator, the Parabolic SAR Indicator, etc.
Optimize potential benefits with positional trading
It is very difficult to determine which trading strategy can be the most successful. However, positional trading can be a potentially profitable strategy for the Forex market.
Positional trading involves holding long-term positions, usually between one month and one year. However, it requires a long-term plan and the ability to predict the future direction of the market.
To start positional trading, you must first select an asset. To determine which currency pair to use, you need to take three factors into account.
1. High long-term volatility
Since you’ll have to pay swap every night you keep the trade open, you’ll usually have to look for pairs that have considerably sharp price movements in the coming months. Otherwise, if you make a modest profit, this may eventually turn into a loss as the cost of the swap may exceed this amount. To do this, we recommend that you look for a currency pair in which at least one of them can be strongly influenced by:
major political events
important economic events in the future.
2. Low volatility in the short term
If you are interested in high volatility in the long term, as mentioned in the previous point, in the short term we are interested in low volatility, because if you opt for positional trading, you will not want to close your orders in just a few days due to possible sudden market movements.
3. Uses low leverage
Although forex traders generally trade with very high leverage, this is not recommended for trading with a positional trading strategy. To determine how much margin you should use for your Forex strategy, you need to consider the following variables:
the amount of money you can afford to lose, remember that you only have to trade with venture capital;
the amount of leverage that gives you the best risk-reward ratio.
When it comes to positional trading, you should keep one thing in mind, the less leverage you use, the better it can be.