Have you been struggling with forex? Have you been using the wrong strategy or kind of mixing them all hoping for the best? Have you been using no strategy? Well no worries, we have compiled a list of the top 10 forex strategies for profitable trading in 2021.
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Forex is a multimillion industry totaling $6.6 trillion, exceeding even the stock market.
Forex is one of the best money-making ventures in the world, which explains the large number of investors flocking this industry day after day. However many of these traders are failing and losing money. Failure in forex can happen due to a lack of a working strategy and money management skills. With the onset of covid 19, the market became volatile.
The year 2020 was especially hard for forex traders and all other financial markets. This is why it was necessary to go back to the drawing board and come up with adaptive methods of forex trading in these changed conditions.
Table of Contents
Top 10 forex strategies for profitable trading in 2021
There are many successful trading strategies, but traders are advised to choose one that best suits a situation. Factors to consider before using a certain strategy are time, personality, and risk tolerance.
Here are some top-rated forex strategies:
1. Scalping:
It is a short-term trading strategy that involves taking several small profits on trading positions. These trades usually take minutes or even seconds. It requires a person with a high-risk tolerance and a quick mind.
Scalpers analyze price charts to predict price changes. The best broker for a scalper is one with tight spreads, fast order execution, and little or no order spillage.
2. Day trading:
It is a short-term trading strategy that only takes place during the day. The trader closes all trades at the end of the day. This ensures that they are not exposed to market movement occurring at night. Day traders conduct technical analysis on short-term charts to see price movement during the day. Most Day traders rely on breakout trading. This is when the exchange rate breaks a certain limit for a specific currency pair and it is confirmed when there is an increase in volume.
3. News trading:
This strategy is for investors with big pockets and a risk appetite. This strategy is not ideal for beginners. News trading depends on volatility in markets that occurs after key news releases.
They monitor the market when a major news release is about to happen. They pinpoint the key support and resistance levels to make quick decisions once the news is out. These traders need to be disciplined in managing their trade positions and often make use of stop-loss and take-profit orders.
4. Swing/momentum trading:
This is sort of a medium-term trading strategy that analyzes the market for a long time. These traders use trends and also trade against trends when the market is correcting. Traders using this strategy enter and exit positions based on momentum indicators that give buy and sell signals. Swing traders find overbought or oversold markets to decide to buy or sell. They also tend to buy before hitting key support or sell before the resistance point.
Popular indicators include moving average convergence divergence (MACD), histogram, and the relative strength index (RSI).
5. Trend trading:
This is a long-term forex strategy involving trends and directional movement of a currency pair in the market. It involves buying on pullbacks in an upward market and selling on rallies in a downward trend.
Usually, trend traders will take a position in the direction of the trend and hold until they teach their objective or the trend begins reversing. These traders make use of stop-loss orders to guard their investments. These traders use technical analysis indicators such as the average directional movement indicator (ADX) and moving averages.
6. Volume weighted average price (VWAP):
VWAP is an indicator that is deemed one of the best because it considers both trading volume and the price of the currency. We get VWAP by multiplying the total price by trading volume then dividing by the number of total volumes. The inclusion of volume in its calculation makes it more powerful than other indicators. Besides, it is very underused. It is a good alternative to the 9 day and 25-day moving average because it is significantly slower. This indicator is less likely to give false signals. VWAP works best when combined with a volume indicator, the 9-day moving average, and a momentum oscillator like MCD; together they give enough confirmation to enter a trade.
7. Support/resistance and two stochastics:
When drawing support/resistance lines, always consider volume. Large volumes on the chart indicate areas of increased supply or demand.
Also, when it comes to the support lines, the horizontal support is more reliable than the diagonal one usually when finding pivot lines.
Also remember when making s/r on your chart start from longer time frames and narrow down to shorter ones eg from months, weeks, days to hours.
8. Parabolic SAR and MACD:
These two strategies are fairly simple and applicable for periods above 15 minutes and on many currency markets. They are freely available on all forex trading platforms. You don’t have to have a complicated forex strategy to be successful. Using many strategies at the same time might lead to discordancy. Therefore, using SAR and MACD can help you get the required signal insight for successful trading.
9. Grid trading on forex: this is the practice of arranging buy/sell orders on a grid at equal intervals. It is a popular strategy that can be used in all time frames and currencies. It is also suitable for both trending and ranging markets. A grid trader places corresponding orders above and below the price level with the same distance, therefore, creating grid orders. This strategy does not necessitate a lot of analysis, therefore making it more automobile compared to the rest.
10. Monday open:
In this strategy, traders make their killing on Mondays, after the market opens. This method uses a clear bar and candlestick chart. Traders don’t have to keep glued to their screen throughout the week anxiously drawing indicators. However Monday open is only active during the day and works best with EUR USD.
As you can see, there are a lot of forex strategies to take advantage of in 2021. Remember that overcrowding your chart with indicators is not ideal as you are likely to get false signals. Also, practice patience when trading; wait for all indicators to align before rushing to make a trade. In addition, don’t be afraid to close losing trades even if you have a time-proven strategy.
Today is a good day to make money! All the best!
N/B: Trading Forex, CFD, Stocks or Commodities carries a high risk, always apply proper risk management.