While there are plenty of trading strategy guides available for professional FX traders, the best Forex strategy for consistent profits and creating the most successful trading strategies can only be achieved through extensive practice.

Let's continue the list of trading strategies and look at another one of the best trading strategies. You can take advantage of the minute time frame in this Forex strategy. In regards to the Forex trading strategies resources used for this type of strategy, the MACD is the most suitable which is available on both MetaTrader 4 and MetaTrader 5. You can enter a long position when the MACD histogram goes above the zero line. The stop loss could be placed at a recent swing low.

You can enter a short position when the MACD histogram goes below the zero line. The stop loss could be placed at a recent swing high.

Below is an hourly chart of the AUDUSD. The red lines represent scenarios where the MACD histogram has gone above and below the zero line:. Source: Admirals MetaTrader 4, AUDUSD, H1 chart between 20 May to 31 May While many Forex traders prefer intraday Forex trading systems due to the market volatility providing more opportunities in narrower time frames, a Forex weekly trading strategy can provide more flexibility and stability.

A weekly candlestick provides extensive market information. Weekly Forex trading strategies are based on lower position sizes and avoiding excessive risks. For this strategy, traders can use the most commonly used price action trading patterns such as engulfing candles, haramis and hammers.

One of the most commonly used patterns in Forex trading is the hammer which looks like the image below:. The chart below shows the weekly price action of NZDUSD and examples of the patterns shown above. Source: Admirals MetaTrader 4, NZDUSD, Weekly chart between 19 August to 31 May Accessed: 27 April at pm BST - Please note: Past performance is not a reliable indicator of future results or future performance.

To what extent fundamentals are used varies from trader to trader. At the same time, the best Forex strategy will invariably use price action. This is also known as technical analysis. When it comes to technical currency trading strategies, there are two main styles: trend following and countertrend trading. Both of these FX trading strategies try to profit by recognising and exploiting price patterns. When it comes to price patterns, the most important concepts include support and resistance.

Put simply, these terms represent the tendency of a market to bounce back from previous lows and highs. This occurs because market participants tend to judge subsequent prices against recent highs and lows.

Therefore, recent highs and lows are the yardsticks by which current prices are evaluated. There is also a self-fulfilling aspect to support and resistance levels. This happens because market participants anticipate certain price action at these points and act accordingly.

As a result, their actions can contribute to the market behaving as they had expected. Did you know that you can see live technical and fundamental analysis in the Admirals Trading Spotlight webinar? In these FREE live sessions, taken three times a week, professional traders will show you a wide variety of technical and fundamental analysis trading techniques you can use to identify common chart patterns and trading opportunities in a variety of different markets.

Sometimes a market breaks out of a range, moving below the support or above the resistance to start a trend. How does this happen? When support breaks down and a market moves to new lows, buyers begin to hold off. This is because buyers are constantly noticing cheaper prices being established and want to wait for a bottom to be reached.

At the same time, there will be traders who are selling in panic or simply being forced out of their positions or building short positions because they believe it can go lower. The trend continues until the selling is depleted and belief starts to return to buyers when it is established that the prices will not decline further. Trend-following strategies encourage traders to buy the market once it has broken through resistance and sell a market once they have fallen through support.

In addition, trends can be dramatic and prolonged, too. Because of the magnitude of moves involved, this type of system has the potential to be the most successful Forex trading strategy. Trend-following systems use indicators to inform traders when a new trend may have begun, but there's no sure-fire way to know of course. Here's the good news: If the indicator can establish a time when there's an improved chance that a trend has begun, you are tilting the odds in your favour to use the best Forex trading system.

The indication that a trend might be forming is called a breakout. A breakout is when the price moves beyond the highest high or the lowest low for a specified number of days. For example A day breakout to the upside is when the price goes above the highest high of the last 20 days.

Trend-following systems require a particular mindset, because of the long duration - during which time profits can disappear as the market swings. These trades can be more psychologically demanding. When markets are volatile, trends will tend to be more disguised and price swings will be greater.

Therefore, a trend-following system is the best trading strategy for Forex markets that are quiet and trending. A good example of a simple trend-following strategy is a Donchian Trend system.

Donchian channels were invented by futures trader Richard Donchian , and is an indicator of trends being established. The Donchian channel parameters can be tweaked as you see fit, but for this example, we will look at a day breakout. Source: Admirals MetaTrader 4, EURJPY, Daily chart between 18 September to 31 May You can get the Donchian Channel indicator completely FREE in the Admirals Supreme Edition package. It's called Admiral Donchian. To upgrade your MetaTrader platform to the Supreme Edition simply click on the banner below:.

There is an additional rule for trading when the market state is more favourable to the Forex trading system. This rule is designed to filter out breakouts that go against the long-term trend. In short, you look at the day moving average MA and the day moving average. The direction of the shorter moving average determines the direction that is permitted. This rule states that you can only go:. Trades are exited in a similar way to entry, but only using a day breakout. This means that if you open a long position and the market goes below the low of the prior 10 days, you might want to sell to exit the trade and vice versa.

Now let's look at another system that could be the best trading strategy for you. One potentially beneficial and profitable Forex trading strategy is the 4-hour trend following strategy which can also be used as a swing trading strategy.

This strategy uses a 4-hour base chart to screen for potential trading signal locations. The 1-hour chart is used as the signal chart, to determine where the actual positions will be taken. Always remember that the time frame for the signal chart should be at least an hour lower than the base chart. For this Forex strategy, two sets of moving average lines are chosen for the best results.

One will be the period MA, while the other is the period MA. To ascertain whether a trend is worth trading, the MA lines will need to relate to the price action. The MA lines will be a support zone during uptrends, and there will be resistance zones during downtrends.

It is inside and around this zone that the best positions for the trend trading strategy can be found. Below is a daily chart of GBPUSD showing the exponential moving average purple line and the exponential moving average red line on the chart:.

Source: Admirals MetaTrader 4, GBPUSD, Daily chart between 4 September to 31 May Counter-trend strategies rely on the fact that most breakouts do not develop into long-term trends. Therefore, a trader using such a strategy seeks to gain an edge from the tendency of prices to bounce off previously established highs and lows. On paper, counter-trend strategies can be one of the best Forex trading strategies for building confidence, because they have a high success ratio.

However, it's important to note that tight reins are needed on the risk management side. These Forex trading strategies rely on support and resistance levels holding. But there is also a risk of large downsides when these levels break down. Constant monitoring of the market is a good idea.

The market state that best suits this type of strategy is stable and volatile. This sort of market environment offers healthy price swings that are constrained within a range. It's important to note that the market can switch states. For example, a stable and quiet market might begin to trend, while remaining stable, then become volatile as the trend develops.

How the state of a market might change is uncertain. You should be looking for evidence of what the current state is, to inform you whether it suits your trading style or not and should be one of the Forex strategies you should be using. Source: Admirals Demo Account Example.

Many types of technical indicators have been developed over the years. The great leaps made forward with online trading technologies have made it much more accessible for individuals to construct their own indicators and systems, as we've gone through in these trading strategy guides. You can read more about technical indicators by checking out our education section or through the trading platforms we offer.

The best Forex trading strategies for beginners are the simple, well-established strategies that have worked for a huge list of successful Forex traders already.

Of course, many newcomers to Forex trading will ask the question: Can you get rich by trading Forex? or: What is the best Forex strategy that always wins? It's important to understand that trading is about winning and losing and that there is always risk involved. In some cases, you could lose more than your initial investment on a trade. There are no easy Forex trading strategies which are going to make you rich overnight, so do not believe any false headlines promising you this.

Trading Forex is not a 'get rich quick' scheme. However, through trial and error and the use of a demo trading account, you can learn about the Forex market and yourself to find a suitable style. It can also help you understand the risks of trading before making the transition to a live account. Traders that choose Admirals will be pleased to know that you can trade in a virtual environment by opening a demo trading account.

Instead of heading straight to the live markets and putting your capital at risk, you can practice your Forex trading strategies on a FREE demo account. This is a great way to help you find the best trading strategy for yourself and the trading strategies that will help you become successful. You can open a FREE demo trading account in just a few minutes and access a range of additional trading indicators and software complimentary.

The best course of action during these events is to consider staying on the sidelines and waiting for the market volatility to subside. Always have a hard stop in the market — Some traders prefer to have what are referred to as mental stops in the market rather than hard stops.

A mental stop is essentially a stoploss level that a trader has deemed important and one wherein they will likely exit if the trade begins to move against them. A hard stop on the other hand, refers to an actual stop loss that is placed in the market and will be triggered automatically when that specific level is reached.

Countertrend traders should consider always having a hard stop in the market to avoid the complications of having to react to sharp adverse price moves. Do not add to a losing position — Some contrarian oriented traders have a tendency to add to their positions as the prices move against them.

Although, this may work for a small minority of experienced traders who are extremely disciplined , the vast majority will find it to be a losing strategy, and one that can run the risk of leading to excessive losses on a position. But doubling down on those probabilities by adding size as the price moves against you can and often will put you in an uncomfortable position.

Wait for confirmation before entering a counter trend set up — Adding the requirement for some type of confirmation mechanism within a countertrend strategy is advisable. Although waiting for confirmation can sometimes reduce the reward to risk profile on a trade, it will boost the overall win rate when used properly. This is particularly true for mean reverting techniques, where even a minor miscalculation can lead to a losing result. Set a reasonable take profit level — The majority of countertrend trading opportunities tend to offer limited profit potential from the risk reward perspective.

Unlike trend following systems wherein you might expect reward to risk profiles of 3 to 1, 4 to 1, or even higher, mean reverting strategies tend to offer less attractive potential profit to potential risk profiles. As a result, contrarian swing traders often find it best to set a conservative take profit target level, typically in the range of 1 to 1 or 2 to 1 reward to risk units.

One area of risk management that traders need to pay particular attention to is position sizing. Betting too little will often result in subpar percentage returns, while betting too much can result in potentially catastrophic damage to your trading account. It provides an acceptable level of risk for a desirable level of potential return.

Traders that decide to take a contrarian trading investing approach , will often be looking for opportunities to sell into an uptrend, and similarly, they will be seeking to buy at lower levels within the context of a downtrend. Potential for higher win rates — As we touched upon earlier, trend following systems tend to offer better risk to reward profiles, at the cost of lower win rates.

Mean reverting strategies on the other hand tend to offer less desirable risk to reward profiles, but come with the advantage of higher win rates. As a result of being able to apply a strategy that offers a more attractive win percentage, a countertrend trader can often realize lower max drawdowns.

Additionally, when drawdowns do come, countertrend swing traders can often trade out of these losing periods faster than those employing longer-term trend trading strategies. Lower holding periods on trades — The traditional countertrend trader is considered to be a swing trader who seeks to hold positions for as little as a few days to as long as several weeks. An average of about one week would be an ideal trade duration for most traders who consider themselves contrarian swing traders.

Holding positions for a relatively short period of time can provide psychological benefits for those who are impatient or have a tendency to lose focus, or simply lose interest in the trade management process over time. More opportunities to apply your edge — Due to the lower holding periods that we just mentioned, countertrend traders will often enjoy the benefit of applying their strategy in the market more frequently than other longer-term position traders. Having an edge in the market is critical to producing profitable results.

But just as importantly, the ability to apply that edge over a longer series of trades, will help amplify those trading returns. This would be very uncharacteristic of most trend based strategies. The ability to trade in and out of positions — Contrarian swing traders have the advantage of being able to get in and out of positions quickly.

They do not have to project price trends over very long periods of time. Instead they can focus on shorter to intermediate term price swings, allowing them to be flexible and trade either side of the market. The ability to be nimble and open to whatever the market presents is a characteristic that many successful swing traders share. Now that you have a sense of some of the benefits that a countertrend style offers, we should also mention some of the drawbacks of such an approach.

For most traders, especially those that are new to the markets or fairly inexperienced, it is much better to start with learning a trend based method.

Once you have refined a strategy that trades in alignment with the larger market trend, then you can then add a countertrend method as a supplement to your overall trading arsenal. Below we have outlined some of the disadvantages of trading against the trend as a primary trade strategy. And more specifically as it applies to the markets, when a trend is set in motion there is a tendency for it to persist.

And as a result, attempts to fade the trend can and do often result in a series of losing trades. Market trends persist longer than turning points — Those that favor countertrend approaches have to be extremely skilled and enter only at the most favorable time.

The reason for this is because turning points in the market can occur rather quickly, providing little time for a trader to react to it. Trends on the other hand are much easier to recognize and will often persist for extended durations making it fairly straightforward to enter into, even at less than ideal entry points.

It can be psychologically difficult to be a contrarian — There is no greater feeling in trading than taking a position against the crowd and the market proving you correct.

While that can certainly be a boost to your ego, it can also be a dangerous exercise, and damage both your trading account, and your own psyche when you are incorrect in your assessment. A contrarian is often regarded as the lone wolf. You will rarely realize any major outsized gains — Countertrend tactics are overwhelmingly bread-and-butter types of trades. That is to say that one should not expect regular intervals of hugely profitable trades.

Countertrend traders are akin to baseball players who are seeking to hit singles and doubles, rather than home runs and grand slams.

While there is nothing wrong with consistently eking out average gains, if you are the type of trader that craves the big price moves, then your personality may not mesh with a contrarian trading methodology. The countertrend trading strategy that will be revealed here incorporates several different types of technical studies.

Once they align to meet our conditions, it will provide for a high probability fade trade set. Within the financial markets, you will often see three distinct price legs or pushes in the direction of the trend, which are interrupted by two smaller corrections. For those who are familiar with the Dow theory or Elliott wave theory, you will recognize this as the impulse structure. If you are not entirely familiar with the concepts within the Elliott wave principle, you will still be able to benefit and use this particular countertrend method.

So, once the market completes these three pushes in the direction of the trend, prices will often reverse and begin to correct a portion of the prior impulsive move. Knowing this, we will seek to locate price trends that have completed this third push, either to the upside in the context of an uptrend, or to the downside in the context of a downtrend.

When counter trend trading, you are looking to profit from the price action moves against the broader trend. When making a counter trend trade, you are looking to profit from the swings higher or lower against the primary trend. Counter trend trading is so popular because you can do it in any market and time frame. You can also make short sharp trades and profit from going both long and short.

Most counter trend traders will be swing traders looking to book a profit when the price makes a swing against the apparent trend.

In the example chart below, you can see a clear trend lower. Price had been making a series of lower highs and lower lows. A counter trend trader would be looking to buy the swing low and make a profit as the price moves higher against the trend lower.

Counter trend traders will often analyze the price action and can use popular indicators like the moving average to help them find their trades. You can use price action analysis and indicators such as the moving average to find when the price is trending higher or lower. After you have identified a clear trend, you are looking for an opportunity to make a trade against the trend.

One of the best indicators you can use to find these trades is the relative strength index RSI indicator. The RSI is a straightforward indicator that can help you identify when the price action is overbought or oversold.

You can combine this information with your price action analysis to find trades when you have identified overbought or oversold market conditions. Counter trend traders will often use a combination of price action and indicators to find and make their counter trend trades. One of the most straightforward strategies to make counter trend trades is combining price action and an indicator like the relative strength index. Using the RSI indicator, you will be able to identify when a market is overbought or oversold and is looking at making a potential correction.

In the example counter trend strategy below, we use price action to identify potential counter trend moves. Counter trend traders could be looking at this support level to make potential long trades against the trend lower, looking for price to correct against the trend.

Two popular indicators for making counter trend trades are the stochastic oscillator indicator and the relative strength index RSI. These indicators can help you find when the price is overbought or oversold and when the price could soon be making a correction. Price the reading moves above the 70 level; it indicates the price is overbought. This could also signal that the price is looking to make a reversal back lower.

On the flip side, when the price moves below the 30 level, it indicates the price is oversold. This could be hinting at price making a reversal and moving back higher. Some of the best strategies will combine several things, such as popular indicators and price action analysis. The easiest way to perfect these strategies is to download some free demo charts and make practice trades.

That way, you can test with different markets and different time frames. I hunt pips each day in the charts with price action technical analysis and indicators. My goal is to get as many pips as possible and help you understand how to use indicators and price action together successfully in your own trading. Skip to content. When carried out correctly, counter trend trading can be a high probability trading strategy.

In this post, we look at counter trend trading and how you can use it in your own trading. Table of Contents. Pip Hunter I hunt pips each day in the charts with price action technical analysis and indicators.

It's called Admiral Donchian. Drop file here. Day Trader: Definition, Techniques, Strategies, and Risks Day traders execute short and long trades to capitalize on intraday market price action, which result from temporary supply and demand inefficiencies. Firstly, the stoploss order should be placed above the high of the candle preceding the breakout candle, as can be seen by the black dashed line above the entry. The best Forex traders always remain aware of the different styles and strategies in their search for how to trade Forex successfully. Traders who use a countertrend strategy and anticipate making a significant number of monthly transactions should consider using a per-share commission structure.

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