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Six Killer Forex Trading Strategies

There are several forex trading strategies that can bring you profits. However, what works in a trending market may not work in a sideways market (and vice versa).

Here are six general strategies for placing trades in different forex trading situations. You may have seen some of these ideas in previous blog posts, but this will be a nice summary of forex trading rules to print and keep by your forex trading desk.

Remember to combine the general information listed here with the more detailed, case-specific information you’ve learned throughout this blog.

Strategy #1: This forex trading strategy works well in both sideways markets and trending markets. To trade the first trading strategy, follow these steps:

1. Enter with one lot.

2. Place your stop loss order at the last level of support if you are a bull (you are buying) or the last level of resistance if you are a bear (you are selling).
3. Analyze the potential risk compared to the potential reward in the trade. Keep your potential losses small.
4. Go for small profits, don’t get greedy.
5. Exit just before the market makes a new high or low. Exit as the market passes through the previous level of support (resistance) to make a new low (high).

Strategy #2: This forex trading strategy works better in sideways markets, but also works fine in trending markets. To trade the second forex trading strategy, follow these steps:

1. Enter with several lots (5 or 10, for example).

2. Place your stop loss order at the last level of support if you are a bull (you are buying) or the last level of resistance if you are a bear (you are selling).

3. Analyze the risk-reward ratio. Keep your potential losses small.

4. Go for small profits (20-30 pips). You should be in and out of the trade quickly.

5. Exit just before the market makes a new high or low. Exit as the market passes through the previous level of support (resistance) to make a new low (high).

Strategy 3: This forex trading strategy works well in trending markets and poorly in sideways markets. To trade the third forex trading strategy, follow these steps:

1. Enter with one lot.

2. Place your stop loss order at the last level of support if you are a bull (you are buying) or the last level of resistance if you are a bear (you are selling).

3. Analyze the potential risk compared to the potential reward in the trade. Keep your potential losses small.

4. Cancel and replace your original stop loss order (to seal in profits). Only cancel and replace the previous stop loss order after the market has made a new high (low).

5. Don’t set a profit limit order. Stay in the market until you are automatically exited when the market hits your stop loss order price (when you are stopped out).

Strategy #4: This forex trading strategy works well in trending markets and modestly in sideways markets. To trade the fourth forex trading strategy, follow these steps:

1. Enter with two lots.

2. Place your stop loss order at the last level of support if you are a bull (you are buying) or the last level of resistance if you are a bear (you are selling).

3. Analyze the potential risk compared to the potential reward in the trade. Keep your potential losses small.

4. Exit with one lot for a small profit before the market makes a new high or low. Exit as the market passes through the previous level of support (resistance) to make a new low (high).

5. Exit with the second lot just before the market hits to Fibonacci extension bounce point (you will be going for a larger profit with this lot).

Strategy #5: This forex trading strategy works well in trending markets and poorly in sideways markets. To trade the fifth forex trading strategy, follow these steps:

1. Enter with multiple lots (5 or 10, for example).

2. Place your stop loss order at the last level of support if you are a bull (you are buying) or the last level of resistance if you are a bear (you are selling).

3. Analyze the potential risk compared to the potential reward in the trade. Keep your potential losses small.

4. Place limit exit orders for each lot at different pip increments (e.g. place your first exit order to exit one lot at 40 pips away from entry; place your second exit order to exit one lot at 60 pips away from entry; place your third exit order to exit one lot at 100 pips away from entry; place your fourth exit order to exit one lot at 150 pips away from entry; place your fifth exit order to exit one lot at 200 pips away from entry).

5. Once the market has started to trend and has moved 100 pips or more away from entry, cancel and replace the stop loss orders for your remaining lots to eliminate your risk. In this case, cancel your original stop orders for the fourth and fifth lots, replacing those stop orders at the breakeven point (the market price 100 pips away from entry).

Strategy #6: This forex trading strategy also works well in trending markets and poorly in sideways markets. To trade the sixth forex trading strategy, follow these steps:

1. Enter with multiple lots (5 or 10, for example).

2. Place your stop loss order at the last level of support if you are a bull (you are buying) or the last level of resistance if you are a bear (you are selling).

3. Analyze the potential risk compared to the potential reward in the trade. Keep your potential losses small.

4. Place limit exit orders for each lot at different pip increments, just as you would in the fifth trading strategy, except this time don’t set a limit exit for the last lot (the fifth lot, in this case). Instead, allow your trade to take advantage of potentially huge moves.

5. Once the market has started to trend and has moved 100 pips or more away from entry, cancel and replace the stop loss orders for your remaining lots to eliminate your risk. In this case, cancel your original stop orders for the fourth and fifth lots, replacing those stop orders at the breakeven point (the market price 100 pips away from entry). As you follow the market with your fifth lot, continue canceling previous stop loss orders and replacing them at new highs or lows, to lock in your profit.

Now you have 6 different forex trading strategies for different market situations. Mastering a few of these could become your bread and butter as a forex trader. The rapid forex blog will continue to teach you more forex trading strategies, but knowing these will add valuable tools to your forex trading toolbox!

Posted in Money Management

7 Habits of a FOREX LOSER!

Losing money in the forex market is totally pitiful! If forex trading were a religion, consistently losing your money would be a deadly sin.

The best way to avoid becoming a forex loser is to know how to spot one and to avoid the forex gambling metnality. By looking at the characteristics of a losing forex trader you will know the pitfalls to avoid.

We’ve all committed some of these errors (Trust me, I AM NO EXCEPTION!)

Fortunately, there are identifiable reasons why some traders fail and others succeed.

There are seven characteristics and attitudes that unsuccessful traders have in common, all of which lead them directly to failure:

1. Unsuccessful forex traders are trading to get lucky and make quick money.
2. Unsuccessful forex losers’ greed exceeds their need.
3. Shameful forex traders think that trading is a game of chance and luck, and therefore do not seek out the education they would need to succeed.
4. Pitiful forex idiots are not willing to pay for their education or mentorship.
5. Moron forex losers are extremely unfocused.
6. Forex jerks do not have a defined trading strategy instead they rely on the forex gambling mentality.
7. Forex losers cannot handle their emotions when they’re trading.

Those seven characteristics of unsuccessful traders set a trader up to lose – with those characteristics and attitudes no trader could ever succeed at forex trading.

Did this post get you upset? Is your blood about to boil?

I’d love to hear some of your comments about other traits of a forex loser…

Posted in Forex Trading Mindset

Using Stops and Limits to Capture Profits

In my last post, I showed you some important tips for proper equity managment. Since this topic was on my mind, I thought I’d give you some more tips about using stop and limit orders to capture profits and protect against losses.

If you place an order to sell below the market that is also called a stop order (also called a protective stop loss order because it protects you against more loss than you originally planned on).

If your original market order is to buy, then you stop loss order will be below the market, set there in case the market does not go up as you predicted.  If the market does not go your way, instead falling, you will be automatically taken out of the market once the market hits your stop loss order price.

Conversely, when you sell above the market or buy below the market your order is a limit order.

The reason is: if you place an order to sell above the market that means that your market order is a buy.  Your order to sell above the market is a limit order, also called a for-profit limit order or profit limit order.

You set a profit limit order to safeguard your profits if the market does go the way you predicted (in this case, your market order is a buy so you hope the market goes up).  If the market does go up, as you hoped, you want to make sure that you lock in your profits before the market turns around again.  Setting a sell order above your buy market order (setting a profit limit order) does just that.

If you place an order to buy below the market that means that your market order is a sell.  Your order to buy below the market is a limit order, also called a for-profit limit order or profit limit order.

You set a profit limit order to safeguard your profits if the market does go the way you predicted (in this case, your market order is a sell, so you hope the market goes down).  If the market does go down, as you hoped, you want to make sure that you lock in your profits before the market turns around again.

Setting a buy order below your sell market order (setting a profit limit order) does just that.

To summarize: if your market order is a sell, then your protective stop loss order will be to buy above the current market price, set there in case the market goes up instead of down (if you’re selling you want the market to go down).

When you place a market order to sell, not only do you need to set your protective stop loss order to buy above the current market price (in case the trade does not go your way), but you also need to set a profit limit order to buy below the current market price, to safeguard your profits if the trade does go your way.  Every sell market order has a buy stop order above the market and a buy limit order below the market.

If your market order is a buy, then your protective stop loss order will be to sell below the current market price, set there in case the market goes down instead of up (if you are buying you want the market to go up).

When you place a market order to buy, not only do you need to set your protective stop loss order to sell below the current market price (in case the trade does not go your way), but you also need to set a profit limit order to sell above the current market price, to safeguard your profits if the trade does go your way.

Every buy market order has a sell stop order below the market and a sell limit order above the market.

Now that you’re learning the basices about forex, you’ll soon be ready to begin trading the forex (excited? you should be. Don’t worry – you can start with as little as $25).

Posted in Forex Basics