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:
Enter with one lot.
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).
Analyze the potential risk compared to the potential reward in the trade. Keep your potential losses small.
Go for small profits, don’t get greedy.
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:
Enter with several lots (5 or 10, for example).
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).
Analyze the risk-reward ratio. Keep your potential losses small.
Go for small profits (20-30 pips). You should be in and out of the trade quickly.
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:
Enter with one lot.
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).
Analyze the potential risk compared to the potential reward in the trade. Keep your potential losses small.
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).
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:
Enter with two lots.
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).
Analyze the potential risk compared to the potential reward in the trade. Keep your potential losses small.
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).
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:
Enter with multiple lots (5 or 10, for example).
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).
Analyze the potential risk compared to the potential reward in the trade. Keep your potential losses small.
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).
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:
Enter with multiple lots (5 or 10, for example).
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).
Analyze the potential risk compared to the potential reward in the trade. Keep your potential losses small.
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.
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.
