Forex Strategy

Forex strategies involve the combination of indicators and price patterns for the derivation of tradeable signals. There are also fx trading strategies based on fundamental factors, but all short term trading strategies must include some technical component. In this section we aim to explain in detail the various aspects of forex trading strategies.

Forex trading strategies

 

Currency Carry trade — let the interest rates do the work

Experience shows that the most important driver of currency trends is the interest rate differential of central banks. Many financial strategies attempt to capitalize on this knowledge, but the most basic and widespread strategy is the carry trade. Read more...

Using the COT reports to predict forex price movements

Before examining the COT reports and a few ways of using them, let us note two important details: Read more...

Trading managed currencies — exploiting central bank policies to make a profit

Managed currencies are those such as the Singapore and Hong Kong dollars, the Chinese yuan, the Russian ruble, where the Central bank doesn’t control the day-to-day fluctuations of the currency, but attempts to manage the direction of the trend by... Read more...

Trend Following — the most popular strategy in all financial markets

Trend following is perhaps the most popular long-term strategy in all financial markets. It is exceedingly effective and profitable when the conditions are favorable, is quite straightforward in its methodology, and there are many individuals, past and present, famous or... Read more...

Exploiting currency options expiries for forex trading

Options are contracts that give the buyer the right to buy or sell an asset at a pre-specified time and price. In return, the seller receives a fee for writing the contract which is termed a premium. Read more...

Using the z score to determine trade size and boost performance

Suppose that we have a trading method which gives us great confidence, produces satisfactory results over a long time, and which refined through a long period of study and experimentation. Read more...

Market cycles and currency trading

In this article we will discuss the relationship between market cycles and forex through a dialogue between a beginner and a successful trader. The successful trader is ST, while the beginner is B: Read more...

Martingale trade sizing and the gambler's fallacy

Over the years, forex has acquired such a bad reputation that there are books published sold with statements similar to the below: Read more...

Trading the news releases

News and economic data are the main drivers of market developments, but in a little different way than many traders think. While many novice traders expect important economic events and news releases to be reflected on the price immediately, complain... Read more...

Predicting market extremes using the put/call ratio

Options have long been popular with forex traders for hedging, for directional bets, maximizing profit or for more complex strategies that are out of the scope of this article, but over the years, the record of options trading for buyers... Read more...

Trading pegged currencies — low risk fixed currency trades

A fixed or pegged currency is one where the currency’s value is matched to that of another asset. The asset may be a single currency, or it may be a basket. Read more...

How to create a forex strategy based on technical analysis

Technical strategies aim to predict future prices on the basis of past developments. All that the technical analyst is interested in is the price, and news, or data have no bearing on his decisions. Read more...

What kind of stop-loss order should a trader use?

In this article we will discuss the various ways to implement a stop loss order. Every trader who has had dealings in any of the financial markets is familiar with placing and executing a stop loss order, but many are... Read more...

Gambler’s conceit

That high leverage is dangerous is well-known to most people, but it is not unusual to make spectacular profits with a highly leveraged account, just as it is not unusual to throw three heads in a row during a coin-tossing competition. Read more...

Clustering Illusion — seeing non-random sequences in a string of random data

Clustering Illusion is the tendency to see non-random sequences in a string of random data. It is especially dangerous for traders, because perceiving a non-random pattern in a random string of wins or losses may lead us to increase leverage... Read more...

Technical strategies based on crossovers

In this article we will study the various kinds of crossovers and how to exploit, interpret and confirm them based on the interaction of indicators with the price and each other. Read more...

The bond market and currency prices

Currencies are the basic building blocks of all economic activity. A grocery, a military contractor, a mortgage borrower, and even gangsters evaluate their economic plans in terms of currencies. Read more...

Interest Rates and Volatility — correlation between interest rate gaps and volatility

Volatility in the currency markets is influenced by a number of factors foremost among which is the risk perception of financial actors. Risk, of course, can be defined in terms of many different variables including politics, natural disasters, in addition... Read more...

Trade Timing — how to decide entry/exit points

If money management is one half-of trading, determination of entry/exit points constitutes the other half. No amount of successful analysis will be useful if we can't determine good trigger points for our trades. Read more...

Forex Scalping – Extensive guide on how to scalp forex

Forex scalping is a popular method involving the quick opening and liquidation of positions. The term “quick” is imprecise, but it is generally meant to define a timeframe of about 3-5 minutes at most, while most scalpers will maintain their... Read more...

Getting Involved in Forex Day Trading

Day Trading can offer a very exciting and lucrative way of trading the forex market for those who take the time to prepare appropriately for the endeavor. Read more...

Forex KISS - How Keeping It Simple Can Improve Your Bottom Line

It's a phrase everyone knows - Keep It Simple Stupid [or Keep It Short and Simple]. However, forex KISS is better known than practiced. Part of this is because of marketing, as well as that ever-present "keep up with Mr.... Read more...

How to Become a Forex Trader – The Simple Three Step Guide

Forex is one of the most volatile type of investment markets and one of the most exhilarating experiences in the world. Forex, in it's nebulous form, is simply trading currencies-buying and selling, betting for and against the various currencies of nations. Read more...

Why Most Forex Traders Fail: Do You Have What It Takes?

One of the pitfalls of not having a trading strategy or ignoring a well-developed one is following your emotions when making trades. If you don't develop an objective trading strategy, you've certainly increased the possibility of your emotions ruling your... Read more...

Forex Trading Plan: Why You Need One

In order to be successful over the long term in managing emotions, a forex trader generally requires an objective trading plan with set trading rules and objectives that will produce consistent profits without incurring excessive draw downs. Read more...

MetaTrader 5 Review - MT5 Trading Software Review

MetaTrader 5 is the latest version of the acclaimed and popular forex MetaTrader trading software. It was released recently in a beta version and we did not want to miss the chance to examine the exciting new forex platform in... Read more...

Why Fear is the Main Emotion Experienced by Forex Traders

Being a professional forex trader can add quite a bit of emotional content to your life. Fear, along with the other main trading emotions, greed and hope make the forex market move. Read more...

Trading a Demo Account Versus Live Trading

Thanks to the Internet and the relatively recent availability of online forex brokers, just about anyone with a computer and an Internet connection can open a demo forex account and trade forex with virtual money. Read more...

Good Forex Trading Technique Involves Taking Losses

Most seasoned forex traders will be more than happy to tell you about their big winning trades, but not so many will be forthcoming about their worst losing situations. Read more...

Assessing the Risk-Reward Ratio When Trading Forex

Many forex traders routinely assess the risk-reward ratio on individual trades they contemplate taking and some even incorporate criteria based on this measure in their trade plans. Read more...

Back Testing Considerations: Primary Considerations When Back Testing a Trading System

Many forex traders, whether knowingly or not, tend to incorporate a belief that "History repeats itself" into their forex trading systems. Market observers and technical analysts have often found that the overall predictability of human behavior when acting in large... Read more...

Common Myths About Forex Trading

The forex trading market makes up the largest global marketplace and trades round the clock from Sunday night to Friday afternoon, trading somewhere on the order of trillions of dollars every day. Read more...

Common Costly Mistakes Made by Forex Traders

Most forex traders are familiar with the risks of trading without a stop loss. Without such a plan as part of your risk management strategy, the market can keep moving against you until you can no longer stand the pain... Read more...

Different Types of Forex Brokers

An important consideration when opening a retail forex trading account involves choosing among the different types of forex brokers available to handle your forex transactions. This represents an important decision, because the type of forex broker chosen can affect both... Read more...

Forex Carry Trade Strategies

In general, the forex trading strategy know as the "Carry Trade" refers to an increasingly widespread forex trading strategy that is usually implemented over longer term time frames and involves taking advantage of the interest rate differential prevailing between two currencies. Read more...

How to Construct a Mechanical Forex Trading System

As forex software becomes more complex and automation becomes more common, many traders now rely on mechanical forex trading systems. These software systems execute trades when certain market conditions are met, with or without the confirmation of the operator. Read more...

Benefits of Mechanical Trading Systems

In a previous article we discussed how you go about setting up mechanical forex trading systems. These automated software systems look for technical market indicators and buy or sell accordingly-sometimes without any input from a human operator. Read more...

Key Risk Management Principles for Forex Trading

Many novice forex traders begin trading without a trading plan, and this is one of the primary reasons why the vast majority of new traders lose money. Read more...

Key Tips for Forex Trading Success

Anyone can get lucky trading forex a couple of times, since exchange rates can fluctuate up and down with roughly equal probability. Nevertheless, forex trading needs to be approached in a highly-disciplined manner in order to achieve optimum results over... Read more...

Learning From Other Traders

It stands to reason that a great deal of useful knowledge about trading forex and other markets can be gleaned from the experience of other traders. Read more...

Range Trading the Forex Market

Range trading in foreign exchange involves the ubiquitous attempt by forex traders to "buy low and sell high." While this may appear very basic at first glance, doing so in practice can prove somewhat elusive. Read more...

The Generality of Charting Techniques

Although forex charts seem especially popular at present, traders in all financial markets use charts. In fact, many of the techniques used by forex traders in charting exchange rates were originally developed by technical analysts operating in the stock and... Read more...

The Importance of Having a Forex Trading Plan

When approaching a field like forex trading where personal decisions translate into profits or losses, having a well-outlined and easy-to-follow plan can make the difference between success and failure. Read more...

The Right Forex Trading Mindset

Description:  How having the right trading mindset can make the difference between success and failure as a forex trader. Read more...

Trading Forex and the Psychology of Winning

Forex trading is an endeavor that requires a certain attitude for success. Many novice traders are unaware of the mental attitude involved for successful trading and begin trading allowing their personal defects of character to be manifested in the results. Read more...

Trading Forex with Multiple Time Frames

Choosing an appropriate time frame is one of the basic decisions for forex. Time frame refers to the width of the window in which you'll trade. Read more...

Forex Trend Line Drawing Tips

Forex trend line drawing is a critical tool in forex trading analysis. Trend lines allow you to see both support and resistance points on a chart. These are then used to help you determine what type of trading activity to pursue. Read more...

How to Trade Forex Using Trends

Trends simply help us anticipate market activity. This allows us to get into a trade early and ride the upward trend until the peak. It also prevents us from staying in a position too long and end up losing some gains. Read more...

Trying Out a New Forex Broker

A number of retail forex traders increasingly believe that an excellent way to test out the services provided by an online forex broker involves opening a micro account with the broker. Read more...

Useful Forex Trading Maxims on Money Management

One of the best things you can do when just starting out trading forex is open up your mind to learning from more experienced traders. In many cases, their words of wisdom have been encapsulated in key market maxims. Read more...

Useful Forex Trading Maxims on Trading Strategy

Over the years, many forex traders have found themselves in trading situations which have a tendency to repeat over time. A number of these situations have had the honor of meriting a trading maxim or adage from which a novice... Read more...

Why Open a Micro Forex Broker Account First

These days, perhaps the easiest way to open a forex trading account is via an online forex broker. Such forex brokers will often allow clients to open micro or mini accounts for customers with initial deposits that can go as... Read more...

Why Traders Lose Discipline

After going to the trouble of developing and implementing a trading plan, why would a forex trader ever begin breaking their own trading rules? Read more...

Why Trading With Rules Makes Sense

The importance of trading with rules, whether trading forex online or any other market cannot be sufficiently stressed. Having a concise and well-defined set of rules before embarking on the trading road can save you untold grief and a lot... Read more...

Advantages of Having a Forex Trading Journal

Trading in the forex market generally affects people in different ways and on different levels. Keeping a trading journal can provide you with some very useful feedback about yourself and why a journal can offer some major advantages to your... Read more...

Avoiding Forex Trading Discipline Breakdowns

After a forex trader has gone to the trouble of working out a viable and potentially profitable trading plan, why would that trader go against their own rules? While some people hold that rules are meant to be broken, in... Read more...

Emotions Commonly Felt When Trading Forex

A number of common emotions may arise for forex traders that can lead to costly mistakes if the trader fails to maintain a disciplined trading mindset. Read more...

Forex Compound Interest Effects

Compound interest can really work for you when trading forex and can help you turn a decent trade into a great trade if it can be held over time. Read more...

Forex Rollover Considerations

The interest rate differential between a pair of currencies can either be your best friend or your worse enemy when trading forex since it affects forex rollover rates. Read more...

The Carry Trade and Its Risks

When considering taking on a carry trade position, a forex trader will first want to take into account the interest rate differential and their forecast for the currency pair over the desired time frame for the carry trade. Read more...

Designing Forex Trading Plans and Rules

Just about every consistently profitable forex trader uses a trade plan and follows it in a disciplined way. Accordingly, this successful trading mindset represents a key forex trading guide post that you will want to emulate as you grow as... Read more...

Forex Trading For Success

When it comes to what successful forex traders have most in common, it has very little to do with their actual trading methodology or informational focus. Read more...

The Trading Business Plan and Risk Analysis

One of the best things you can do as a forex trader to assure your long term survival in the business is develop a sound and objective trading plan and the discipline to stick to it. Read more...

Five Top Money Management Tips

Trading the forex market without safeguards can be like skydiving without a parachute. Anyone serious enough about trading would do well to incorporate money management techniques to their trading plan to protect their portfolio. Read more...

Trading Strategy 101 - Cut Losses Short, Let Profits Run On

Perhaps one of the most time honored and popular sayings among forex traders has a number of variations along the lines of the following words of wisdom: Read more...

Common Forex Trading Account Types

Once the domain of large banks, multi-national corporations and hedge fund managers, the forex market can now be traded by anyone with a computer and an Internet connection. Read more...

Desirable Forex Trading Platform Features

Before you even open a funded account with an online forex broker, you will usually have an opportunity to review the features of their forex trading platform by using it to trade forex in a demo or practice account first. Read more...

Forex Charting Software

One of the first applications for computer software when it came to trading the forex market was in plotting or charting historical exchange rates over time. Read more...

Use Caution With Managed Forex Accounts

Legitimate managed forex trading accounts may not be the easiest investment vehicles to find in today's forex market. Many unfortunate people have found to their dismay that their forex managed account funds have been stolen by fraud perpetrators operating what... Read more...

Trend Reversals in the Currency Market: How to Time them?

As traders, we are continuously told by veterans not to try to time markets due to the great risks involved. It is a fact that if you make a sizable commitment in either direction and the market fails to act... Read more...

Spot Market Versus Currency Futures Trading

Currency futures trade in a completely different manner than the cash foreign exchange market where trading is done primarily in the spot and forward markets over an electronic and telephone network. Read more...

The Basics of Forex Swaps

In the forex market, a foreign exchange swap is a two-part or "two-legged" currency transaction used to shift or "swap" the value date for a foreign exchange position to another date, often further out in the future. Read more...

From the Gold Standard to Floating Exchange Rates

The currency or foreign exchange market has evolved gradually to become the largest capital market in the world where major currencies are actively traded in a system of floating exchange rates. Read more...

Forex Indicators: Can Universal Forces of Nature Guide me?

Forex indicators, one day you swear by them, and the next day you swear at them! Can't seem to live without them, but you can't kill them either! How could we trade foreign exchange without technical analysis? Indicators can be... Read more...

The 24 Hour Forex Market

One of the main reasons the forex market has become so popular, especially now that retail accounts are available for online trading via forex brokers, is the fact that the market trades continuously 24 hours per day, five days a week. Read more...

Where Forex Trades

In general, the foreign exchange market has no centralized exchange, although futures on some currency pairs are traded on major exchanges like the Chicago International Monetary Market or IMM in the United States. Read more...

Diversifying Your Portfolio With Foreign Currencies

Portfolio diversification consists of an investment strategy which basically spreads risk among a number of different types of investments. Read more...

Essential Forex Trading Terminology

Like many specialized professional fields, the forex market has developed and commonly uses a set of brief terms or phrases that together form the set of forex trading jargon terms. Read more...

Forex Market Information Access

The unregulated and global nature of the forex market tends to make trading on insider information very unlikely compared to how trading is conducted in the stock markets. Read more...

Less Can be More When Trading Forex

A good reason to consider trading forex involves the relatively low learning curve involved in trading the various currency pairs. Read more...

The Best and the Worst Times to Trade Forex

One of the biggest plusses that the foreign exchange market offers traders consists of the fact that currencies trade twenty four hours a day, five days a week. Read more...

Trading Forex Versus Stocks

The foreign exchange market has often been the market of choice for many savvy traders, commonly being preferred over bond, stock and commodity markets for its liquidity and other desirable characteristics. Read more...

Trading Trends in Forex

One of the most popular sayings heard on Wall Street just has to be, "The trend is your friend." Read more...

The Low Cost of Getting Started Trading Forex

Trading currencies in the forex market, once the exclusive domain of large banks and corporations, can now be done by just about anyone with a reliable internet connection to their computer. Read more...

Taking Out Stops in the Forex Market

Many traders new to the forex market tend to think that because the market is so huge - with trillions of dollars traded per day - that it cannot be easily manipulated. Read more...

Avoiding Problems with Forex Brokers

Unfortunately, many traders new to forex and online forex brokers have been taken in by scams operated by disreputable forex brokers. This fact makes taking the time to choose a good forex broker very important. Read more...

Computing Swap Points

The difference between the forward rate and the spot rate for a particular currency pair when expressed in pips is typically known as the swap points. Read more...

Rollover Fees

When keeping positions overnight while trading forex, you will inevitably come across the fee charged by your broker to perform rollovers. Read more...

Overlapping Forex Trading Sessions

Many active forex traders have noticed that certain times of the day seem to see more price action and trading volume in the forex market. Often, these especially active periods are when the trading sessions of more than one major... Read more...

Leverage and Its Risks

Leverage can be defined as the amount of a trading position you can control with a given amount of margin, i.e. money placed on deposit as collateral. Read more...

Cross Rate Trading Strategies

Trading in cross currency pairs offers significant opportunities to the forex trader. Read more...

Cross Rates and Cross Currency Pairs

The forex market's most actively traded currency pairs all include the U.S. Dollar, and those pairs tend to be where the greatest liquidity exists in the forex market. Read more...

Dealing Spreads Provide Incentives

The forex market generally allows its Interbank market makers and retail forex brokers to charge their customers a dealing spread as an incentive to provide liquidity to the largely unregulated market. Read more...

Forex Broker Commissions

In general, brokers in just about any market make their money from commissions. Nevertheless, the brokerage commissions charged in the forex market to individual traders by online retail forex brokers are perhaps not as obvious as those charged when you... Read more...

Forex Broker Lots

In the forex market, the term "lot" usually refers to the minimum transaction amount for a particular currency pair. Lot sizes will usually be expressed in terms of the base currency for that pair, but might also be denominated in U.S. Read more...

How Brokers Profit From Orders

The forex market seems to have very low transaction costs that are often touted as being just the market making spread that can be as narrow as 1-2 pips in the major currency pairs. Read more...

Trading Market Classifications

Trading markets generally tend to fall into one of the two primary categories of trending and non-trending markets. Read more...

Popular Forex Chart Types

Technical analysts commonly use a number of different types of price charts in order to review the price action of exchange rates for a certain currency pair. Read more...

Evaluating Automatic Forex Trading Systems

Many retail forex traders have become understandably curious about how well the various commercial automatic forex trading software products perform. Read more...