A profitable forex strategy that leads to successful trading is possible for any forex trader, using the guidelines shown in this article. Trading the forex market profitably can be accomplished by knowing what time of day to trade, having a set of accurate signals that are easy to interpret, and reading the trading signals correctly. Determining if the market is trending or ranging is also beneficial. Follow the guidelines and steps listed below to ensure that you have a profitable forex strategy that leads to much better trader.
When To Trade The Market
The best time to trade the currency market is in a 4 to 5 window of time just before the opening of the New York Stock Exchange. This is when forex trading activity is highest and you see strongest movement cycles. The currency pairs have longer movement cycles during this time. We refer to this as the main session. It is also possible to trade in the Asian session using the techniques in this article, but you should wait until you have one year experience before attempting to do this, due to lower volatility and shorter movement cycles. Executing trades in the Asian session in addition to the main session will naturally give you more pips and more profitable forex trading, especially if you trade many pairs.
Reading The Trading Signals
If you read your trading signals properly you can enter buys or sells in the main session and start to bring pips into your account. This is true for intra-day trades, or trade entries into the existing trends. One of the best signaling systems available is The Forex Heatmap®. Most forex traders only trade the EUR/USD. If a trader wants to buy the EUR/USD you can look for EUR strength across the board on the heatmap, like the example below, a strong 1.71% movement on this day.
Most EUR/USD traders really need a signaling system like this. The good news is that the heatmap works to provide buy and sell signals on 28 pairs, not just the EUR/USD. So naturally your high quality trade opportunities and profits trading the forex market will increase quite a bit with a signaling system like this, due to having many more trading opportunities.
Trading Larger Trends
Trading in the direction of the major trends of the forex market will always be part of any profitable forex strategy, and naturally make successful forex trading a reality. All you have to have is a simple set of exponential moving averages to check the trends, then focus your trades in the direction of the higher time frames, H4 and larger. This way if you enter a trade and are going in the direction of the trend, you have a chance for additional profits tomorrow and the day after that as the trend continues.
Profitable Forex Strategy For Trading Ranging Pairs
When the forex market is not trending, it is ranging. Ranging pairs are pairs that are cycling up and down inside of support and resistance. If you would like to trade pairs that are ranging, just make sure that they are ranging up and down in at least a 100 pip range so your money management and risk/reward ratio is solid. All trades carry risk so the potential reward must be fairly large. You can check the moving averages for the amounts of the ranges. Make sure the pairs you range trade are ranging on the H1 time frame or larger.
Economic News Calendar
Another component of a profitable forex strategy would be to know when the news drivers are, related to the pair you are trading. For example if you are trading the USD/JPY you would want to know when all of the strong economic news drivers were scheduled for the USD or JPY currencies. There are many economic news calendars available on the web, here is a handy world economic news calendar we like on our website. It shows the news drivers for all eight currencies we trade, along with other currencies too.
Risk Reward Ratio
Before entering any forex trades, forex traders should also know the risk to reward ratio of every trade they enter. This ratio can be calculated in advance so you can decide yes or no well ahead of seeing any buy or sell signals for that pair. Example: A trader is considering buying the AUD/USD, when it breaks the short term resistance, the next resistance major is 120 pips away form the breakout point. If you buy the pair and open the trade with a 30 pips stop, then 125/30 is 4 to 1 positive money management ratio. This is a great ratio because even with only 50% accuracy you can grow your trading account at a very high rate with ratios like this. You risk 30 pips with 120 pips of profit potential.