Forex trading strategy: key concepts to start with
As soon as a trader has learned the basic terms of Forex trading and familiarized himself with the core concepts of Technical and Fundamental analysis, he faces the next, even bigger challenge – to develop an effective trading strategy.
Forex trading strategy is a set of rules that allows market participants to systematize trading, and give a clear idea of when to enter and exit a position, or when it is better to refrain from trading altogether. The strategy also provides for the style and timeframe of trading, which assets to use, and what lot to trade. It also helps to control traders’ emotions and protect against their negative impact on trading decision-making.
Moreover, as practice shows, trading based on intuition and other unsystematized factors, although it can bring a one-time return, in more significant time periods becomes disastrous for the deposit. An experienced trader in his deals is necessarily guided by fundamental principles and influencing factors. In this article, we will analyze how to create your own trading system and what you need to consider in order for it to make a deal.
How to choose a Forex trading style and market type
Before proceeding to the creation of the Forex strategy itself, it is advisable to decide on the style of trading and the markets in which you want to buy assets.
A trader can choose a long-term, medium-term, short-term, or intraday trading type. The trading style you use will depend on what timeframe you choose, which in turn is based on temperament, deposit size, goals, and many other factors.
If you are ready to devote time to trading, then you can trade at any timeframes. For example, it can be M1 (once per minute updated charts) and M5 for scalping, M15, M30, and H1 for intraday trading, or H4 and D1 for mid-term trading. It should also be taken into account that the lower the timeframe, the more difficult it is to analyze the market facing more false signals.
If you do not plan to constantly track the situation, then you can use the D1 timeframe. You will need much less time to conduct the analysis, so there is no need to participate during the day. It is enough to enter the trading terminal for a few minutes to check if a new signal has appeared for your strategy. Especially if you are a beginner trader, then it’s better to try trading on D1.
The next step after choosing a timeframe is to determine what assets you want to trade. It can be stocks, currency pairs, indices, futures, and much more. A lot in creating your strategy will depend on your capital and the amount of risk you are willing to take. When choosing an instrument, novice traders should take into account its liquidity in the Forex market, and volatility, and also approach trading wisely and diversify their portfolio in order to hedge possible risks.
Pick up Technical indicators for Forex trading
The following important component of drawing up your strategy is the selection of indicators to determine the signals to enter or close your deals. Experienced traders do not use only one indicator, as it can give false signals. Instead, they use a combination of them. For example, two or three moving averages of different periods, a moving average plus an oscillator (a tool that builds constructs max and min bands between two extreme values, and then draws a trend indicator that fluctuates within this range), and many others. In the trading terminal, market participants can find many built-in indicators and graphical tools.
Market participants can also choose not to use indicators at all. The main thing is that you should also make sure that you do not overcomplicate your strategy, otherwise, it will be more difficult to follow the trading plan.
Applying risk management tools in Forex trading
In order to start trading, you should define the entry and exit rules for your Forex strategy. This should be an accurate signal so that you have no doubts about whether to enter a trade. Some traders use candlestick patterns in combination with support and resistance levels as a signal. Other traders use indicators to confirm entry into a trade, for example, one of the most commonly used indicators is the stochastic oscillator.
Also, think about exit rules in advance, and you will not only remove emotions from the trade but will also be able to quickly close the position when the market turns against you. This is why it is so important to always use risk management tools like stop-loss.
For example, if you opened a deal, the price went in the direction you need, but at some point, you need to close the deal and get revenue. For this purpose, you need to use another protective order take-profit that should be set at support/resistance levels, Fibonacci levels, on the opposite side of the channels, etc.
There is another way to exit a trade such as a trailing stop that combines the features of both stop-loss and take-profit as a way to automatically protect yourself from the downside trend. If you set a trailing stop of 20 points, then when you open a deal as soon as the price moves 20 points in your direction, the trailing stop will pull up to the level of opening a trade. If the price reverses at this point, you have nothing to lose. And if the price moves further, the trailing stop will follow it for a distance of 20 points until it reverses and the trailing stop is triggered, fixing some part of the income.
Test your Forex trading strategy
Testing the Forex strategy you have created will not only allow you to see how the strategy will perform on historical data, but will also give you the opportunity to gain experience with charting. For this purpose, lots of traders use the strategy tester tool that can analyze your strategy over a period of several years in just a few hours saving you a lot of time and allowing you to identify the shortcomings of your system, and choose the optimal parameters of the indicators.
It will never replace testing your Forex strategy on a demo account or in real-time, but it will be the best step in this phase of building a trading pattern and practicing trading in real market conditions.
Check your Forex trading strategy on a demo account
Using a live demo account is a great next step for testing the Forex strategy you’ve created. Not to mention that demo trading will allow you to gain more experience and confidence in your Forex strategy, it also will bring you closer to real market conditions and will help you deal with your emotions and trading psychology.
The best Forex brokers provide free demo accounts with a $100000 virtual balance to trade all popular assets so there is no risk to lose your own money. Besides, all technical indicators and charts in the demo account don’t differ from the real one, which will allow you to get used to the functionality and become a real pro before starting real trading.
Social and Copy trading in the Forex market
When creating new Forex strategies, the best brokers offer traders to use tools such as Copy and Social Trading. These features allow you to follow the signals of other market participants and learn from live examples of effective deals, as well as join the community of traders and share information and discuss the latest trends. In addition, with automatic trading, you can save time and receive passive income by mirroring the transaction by pre-determining the provider and the invested amount.
One of the well-known brokers NAGA Markets offers an automatic copy feature through its platform. AutoCopy by NAGA is a state-of-the-art tool that can be used by any trader without prior experience or knowledge. Thus, you no longer need to be an expert in the markets, which will eliminate the necessity for you to receive all the market information since you get automatic copying at the touch of a button, just find the NAGA trader you want to copy.
Another international broker, HF Markets, offers HFcopy, an original broker’s copy trade feature that allows traders to earn by creating trading strategies as a strategy provider or copy trades as a subscriber.
VPN services for safe Forex trading
Running your new Forex strategies with various tools and instruments sometimes can be unprotected in any way and may carry some risks, such as leakage of personal information or violation of anonymity by third parties. To secure the transmission of information with military encryption, hide activities from your ISP, or protect yourself from various hacker attacks, many traders recommend using the best VPNs for Forex trading.
VPN providers allow traders to use strong data encodings on the Internet and show not their own, but a fake location, thereby protecting information about themselves from prying eyes.
Click the button below to get the best VPN deal for Forex trading:
In addition, thanks to virtual private networks, your personal information will be protected when using Wi-Fi in public places, because by connecting to the network somewhere in a park or in a cafe, our devices become an easy target for hackers and scammers and they can literally find out about us everything down to credit information and private messages, which would be impossible if you were protected by a VPN.
Top Forex brokers for testing your strategy
Creating your own trading strategy for dealing with various assets may seem like a complex task for a novice trader, however, there are many tools and features that can help. Top Forex brokers provide demo accounts for practice, with which you can test your ideas and choose the right assets for yourself, and Copy and Social trading give the opportunity to learn and earn on transactions of other market participants.
It is also important to mention that many traders open several accounts with different brokers to analyze and prove their strategies, so they can not only hedge risks and compare different trading platforms, but also receive all kinds of Forex bonuses up to 100% on the deposit.
Meeting all the requirements, we have compared for you the best Forex brokers licensed by reputable international financial regulators to start your trading journey.
Exness Forex trading
Exness is a multi-asset brokerage company that offers a wide range of trading instruments including currency pairs, stocks, indices, metals, energies, popular Cryptocurrencies like Bitcoin and Ether, and others.
Traders with different levels of knowledge and requirements will be able to find a suitable terminal for themselves, as the broker offers a variety of them such as Meta Trader 1, MetaTrader 4, MetaTrader 5, or MetaTrader WebTerminal, and also provides a mobile application for iOS and Android to follow the market even if there is no computer nearby. In addition, traders can increase the speed by connecting to a VPS server.
Among the presented accounts there are standard retail, and professional trading accounts, as well as a demo for improving your skills and practicing your strategies without the risks of losing your funds.
You can deposit and withdraw funds through bank transfer, bank cards like Visa and MasterСard, Bitcoin, Tether, Perfect Money, NETELLER, WebMoney, and Skrill.
Exness, as a company with extensive experience and strict standards, is licensed by regulators such as FCA, CySEC, FSCA, FSC, FSA, and others, which leaves no doubt about its reliability. Try trading with Exness right now using our dedicated button below.
eToro Forex trading
eToro is the world’s leading online trading platform for currencies, commodities, and indices with maximum convenience and transparency. Besides, eToro is famous for its wide selection of Cryptocurrencies including Bitcoin, Bitcoin Cash, Ethereum, Ethereum Classic, Ripple, Dash, and many more.
The company offers its clients a self-developed web terminal available in a personal account and as a mobile application for Android and iOS. eToro’s personal account combines all the functions of the platform: account management, self-trading, and copying professionals.
Accounts are divided into Retail and Professional Client, which have many risk management features such as negative balance protection.
Deposit-withdrawal operations are possible by bank transfer, payment cards, using electronic payment systems (PayPal, Skrill, Neteller), and the Giropay payment.
The company holds three licenses from reputable financial regulators such as the FCA (UK), ASIC (Australia), and CySEC (Cyprus/Europe) and takes all necessary precautions to store the personal data and funds of its clients safely and securely. You can try working out your strategies with eToro and get special offers from TopForex.trade by clicking the button.
XM Group Forex trading
XM Group is a brokerage company that has been providing remote trading services in the global financial markets since the distant 2009. To date, the number of the company’s customers already exceeds 5 million users, and this number continues to grow.
XM Forex broker clients have access to a huge number of instruments, including the foreign exchange market, the metal market, and the energy market. In addition, it is possible to trade on the stocks of the world’s largest companies (Apple, Microsoft, Uber, Facebook, and others).
The company meets newcomers by offering to use a free demo account to start learning and testing trading strategies. In addition, a huge array of educational materials is presented on the site of the Forex broker XM.
The company offers its users popular trading platforms: MT4, and MT5, which are adapted for mobile devices. Traders have several types of accounts at their disposal, depending on the initial deposit and personal preferences: Micro, Standard, XM Ultra Low, and Shares with negative balance protection, good leverage, and tight spreads.
XM Group is regulated in several jurisdictions, including ASIC, CySEC, IFSC, and DFSA. The broker also has a very attractive bonus program of 100% for the first deposit and provides the opportunity to connect to a virtual private server (VPS) in London. Test your trading strategy and get your special bonus by clicking the button below.
HF Markets Forex trading
HF Markets – before rebranding known as HotForex – is a broker that has been operating in the international currency and financial markets for over twenty years and has more than 3.5 million open client accounts. The company operates in 25 countries around the world and is in the top 100 brokers according to World Finance.
Traders should pay special attention to metals trading, and in particular, Forex Gold trading as the broker sets low spreads and gives an opportunity to trade shining metal against both the USD and EUR. In addition to metals, traders can find another 1200 instruments, including Forex, energies, indices, commodities, ETFs, stocks, and bonds.
HF Markets offers a wide range of accounts including Micro, Premium, Fixed, VIP, and Zero Spread accounts for trading on MT4 and MT5 terminals, which are available on desktop, web, and mobile versions for Windows, iOS, macOS, and Android.
In addition, traders can use a special HFCopy platform to follow the strategies of professional traders while the latter can additional income from sharing information. Also to get acquainted with the platform and practice trading strategies there is always a demo account with a virtual balance of $100 000.
HF Markets is regulated in the EU and fully compliant with CySEC, as well as in the United Kingdom under the supervision of the FCA and in Dubai under a DFSA license. Open an account that suits your needs and test your strategies with HF Markets now via our special offer button.
NAGA Markets Forex trading
NAGA Markets is a social network and trading platform that allows traders of all levels to invest in various financial markets including currency pairs, CFDs, Cryptocurrencies, indices, commodities, ETFs, and futures as well as real stocks.
Clients can use the popular trading platform MetaTrader 4 and its newer version MetaTrader 5, as well as the company’s own development – the NAGA web platform with mobile applications. In addition, one of the main advantages of the NAGA offer is the possibility of Social and Copy trading, that is, automatic repeating of trades of the best traders.
Among the accounts, market participants can find unlimited demo accounts, real, Professional, as well as VIP. Depending on the number of funds on the account, you get a trader’s level, bonuses, and discounts.
NAGA clients can top up their trading account by bank transfer, using payment cards, through the electronic payment systems Giropay, Skrill, Neteller, PaysafeCard, and Klarna, as well as using Cryptocurrencies (Bitcoin, Ethereum, Dash, Litecoin, Bitcoin Cash, and NAGA Coin).
The company has received licenses from proven and trusted regulators such as the FCA and CySEC. Try trading with NAGA and get a special offer from TopForex.trade by clicking on the button.
AvaTrade Forex trading
AvaTrade is an international company formed in 2006 with thousands of clients across 6 continents under ASIC, FSA, Abu Dhabi, and the British Virgin Islands regulators. The broker strives to provide its clients with the widest range of services and products and specializes in trading in CFDs, Cryptocurrencies, commodities, stocks, exchange-traded instruments (ETFs), bonds, and market indices.
AvaTrade has many different trading platforms to suit any needs, including MT4, MT5, AvaSocial, AvaTradeGo, AvaOptions, and WebTrader. In addition, so that your trading is not limited to a computer, the broker has developed a mobile application for iOS and Android.
For market newbies and existing clients, the broker provides a demo with a virtual balance of $100 000, with which you can test your trading strategies and get acquainted with new tools without the risk of losing your funds.
In addition to a demo account, you will be able to use such a useful tool as the Ava Copy Trading – AvaSocial that enables you to copy the performance of professional traders you choose and gain with them the way they trade. You can learn more about trading with AvaTrade and create your own strategy by clicking on the button.
Creating your Forex trading strategy - FAQ