• Mon - Fri : 8:30am to 9:30pm
  • Sat & Sun : 9:00am to 6:00pm

Forex Trading Strategies

trading strategies

Forex Trading Strategies | A correlated trading strategy

The best trading strategy you can ever use in your trading journey; a correlation strategy)

The main goal of this blog post is to share my journey in this field.


My first trading strategy was in early 2007. I found some trading ideas and some technical analysis techniques. I was quite impressed by the techniques used by some traders. They were not just trying to profit from their positions, but trying to beat the market.

They were thinking about making profits by understanding the market.

I was quite curious about how this was possible.

Can you manipulate the forex market? I started by learning about the concept of the leverage ratio. This is the difference in strength under good Forex trading strategies. Because the only end you can manipulate the Markets, is your end. This happens only when you know how to hack the tools on your trading software.

In case you don't know what is leverage, simply put the leverage ratio on trading is the amount of equity a broker or an exchange has over your capital. Which can work for you or against you, when it is not used the right way. And so it can be manipulated only from the broker side. The leverage ratio you should consider it based on your trading style. a trader that relies primarily on market analysis with fast execution , should pay extra attention to the leverage ratio applied to the trading account.

forex trading strategies


One of my first forex trading strategies was closely related to my leverage ratio, which was 1:500. Very high leverage.

But I was only trading the most common currency on the forex markets, currencies like the USD ($), the Euro (€), the English Pound (£) and the Canadian dollar. My primary goal with that strategy was simple, make some money by following the economic calendars' events and the trends.

That alone result in not enough, so I lost a lot of money in the long run.

My turning point came when I started to learn about trading correlated. This trading technique is basically buying one asset while selling another inspired by the high correlation percentage of each asset.

To master that strategy it took me around two years, after that, I only trade correlated and my profits have skyrocketed thanks to the tradeable quality I got.

I encourage you to dig into the correlated forex trading strategies for trading major currencies before embarking with any other strategy. Essentially what I am saying is; save yourself from the frustration of losing your money using too complicated strategies which cost you money and even health well being.

If you want to know more about my specific correlated forex trading strategies just leave a comment.

I will share t with you for FREE. Without asking you to open an account anywhere or asking you for something in return. Clearing any doubt.

Swing trading is another trading strategy I tried.

This is not a trading model for an ordinary trader, though it has proven to have great profitability and simplicity with a lot of trades being carried out successfully under my portfolio on a daily basis.

I won advice you to choose a swing trading strategy without proper training, this applies particularly with those new to strategy development. So you need to choose your own trading model and invest the money properly. Don't go around testing one different strategy every day to achieve better results.

It will not happen. You need to school your self first, using a demo trading account. Now, as an experienced trader, you already have a strategy running. Is it working your trading strategy?

 If you're already doing swing trading with some losses, then keep trading but go with small profits and small losses because your aim is not winning or getting richer from trading. You are aiming for the long run on trading that is sustainable in the financial horizon, hence, trading strategies not only work for your profit but also for your sustainability every day.

Check this video about swing trading:

Forex trading strategies with support and resistance levels

Trading strategy with support and resistance levels and other technical parameters including chart patterns and technical analysis will also be covered.

Simply because on your early stage when choosing which forex trading strategy you will use, this is one of the first to reach your list of trading strategies candidates.

Now, support and resistance levels are present on each chart, you know that. But because of the fame around them, almost instantly, comes to your mind the temptation of trying to forecast the future near trend.

Because this temptation will surely drive you to want to open a position based on your speculation of the market. Even when you know that 95% of the chances are against you. For the forex market is volatile, unpredictable, wild.

Trading the support and resistance levels is almost like getting lucky every time in forex. But forex is not a lottery, it is more like an art where the talented ones live from it. Say you developed a great chart analysis where your higher highs and lower lows are telling you your next trade trend. And the trusted happy you, follow your forecast, but suddenly everything changes and what you saw as a probability, now is a panic attack.

Because trading support and resistance levels are important when you have good chart reading skills, especially very close attention to trend detection capabilities.

There are different cases where you can use forex trading strategies of supports and resistance in trend lines. But first, you must master it and feel confident that you will not blow your trading account. It becomes more relevant when you are a day trading kind of person.

Is it forex scalping a good strategy?

Yes, it is. But in a more recent case - when the market crashed and banks in Europe were put into bankruptcy because of a lack of capital from European depositors. And in the US some big Wall Street banks were exposed and unable to service their creditors. The practice for forex traders scalpers was brought into question.

When you use the forex scalping strategy do your math before starting to make trading decisions on any particular currency pair. The last thing a trader wants is a market disaster due to bad maths.

Scalping does take the risk factor to extreme levels. I define a scalping trading strategy as a combination of trading without technical understanding, extreme volatility, very little fast profits and being exposed. The scalping strategy relies on two critical factors:

  1. The alpha signal which indicates eventually whether we should enter the market long or short.
  2. Strategy execution, or a day trader expression

Why did I mention extreme Risk and low profit in scalping?

Considering risk. The biggest risk to a scalper trader comes once the order is filled, the market goes against his position until obliged to trigger a stop-loss order. 

About the expected profit. If the trader gets too ambitious when setting the profit target, he might never realize the profits a position is showing.

Theoric Framework for a scalping strategy.

A trade is filled on a limit buy order looking wheater to place a profit target and stop-loss limit orders. Given a present price of the underlying asset of X, the scalper trader keeps seeking to forecast the profit target of pips, also the stop loss level of pips which will determine the prices at which the limit orders to exit the trade. Translate these into returns, as follows:

Upside trend: Ru = Ln[X+p] – Ln[X]

Downside trend: Rd = Ln[X-q] – Ln[X]

This situation is illustrated in the chart below.

Here is my approach to moving averages.

Here is how they have traditionally been defined using the rule of 70. The rule of 70 represents an estimating number of years it takes for an investment or your money to double. Also referred to as doubling time, the rule of 70 is an estimate because investors often pay a little less than market capitalization.

Here the Formula for the Rule of 70: {Number of Years to Double}=\frac{70}{\text{Annual Rate of Return}}Number of Years to Double= Annual Rate of Return 70

Learn to Calculate the Rule of 70:

Get the annual rate of return or growth rate on the investment or variable.

Divide 70 by the annual rate of growth or yield. Examples: 

  1. 3% growth rate, takes 23.3 years for the portfolio to double simply because of 70/3=23.33 years.
  2. 5% growth rate, takes 14 years for the portfolio to double because of 70/5=14 years.
  3. 8% growth rate, takes 8.75 years for the portfolio to double because of 70/8=8.75 years.
  4. 10% growth rate, takes 7 years for the portfolio to double because of 70/10=7 years.
  5. 12% growth rate, takes 5.8 years for the portfolio to double because of 70/12=5.8 years.

Here the biggest limitations I found on the Rule of 70:

As mentioned above, the rule of 70 and any of the doubling rules involve estimates of growth rates or investment rates of return. Hence, the rule of 70 can produce wrong results since it's confined to the ability of the trader to forecast future growth.

Position trading or investing does have its benefits.

Greater flexibility and financial gains with lower transaction fees. Brokers know that more than 90% of traders lose money while trying to make it. And they profit from you and from me. Yes, we can make some profit, but not always.

The mare promise of you making big money just by opening a position is a bait that is bitten every single day by those new investors illusioned with the promise of profit. Because they fail to recognize that the market moves in an unpredictable way. The only strategy allowing us to manipulate the market via our positions is the correlated strategy

You just need to find the correlation levels of the major pairs and master that information, interpret it very well, and you will make better trades.

If you don't get prepared, you will be a short term trader, and I don't mean as a trading strategy but as a trader. You would quit trading the currency markets too soon. 

If you buy and sell, never on the same pair at the same time, if you feel like doing it, you better stop trading real and go demo. Price action will eat you alive with such an approach. Real-time trading is also available in many brokers for you to school your trading experience.

My final words: trade forex thinking on a long term trade experience, because even the best traders in the world lose money, and the lose BIG. But the have a backup plan, always.

Remember, correlation is the key for a well prepared, ready to face the market as a professional.

Comments

Putnam Q.

"with what I learned about a Power FUND I could probably go into sales for you. Man, this thing is getting better and better as I learn more about it. Powerfund is exactly what our business has been lacking."

Fidel W

"We can't understand how we've been doing all those mistakes in our financial group. Our Financial group has got everything we needed."

Leave a Comment