Top 5 Forex Strategies For Successful Trading In The City Of Angels

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Top 5 Forex Strategies For Successful Trading In The City Of Angels – What is the best forex trading strategy? Of course, this is a question I get asked many times a day and it is very important. When you start trading, you need to commit to a specific trading strategy and then focus all your attention and energy on making it work. Most traders never do this and then fall victim to system-hopping. In this guide, I will explain the differences between different strategy types, what they are based on, when they work best, and what you should know when choosing a particular forex trading strategy. We will cover the following trading strategies: #1 Trend-Following #2 Pullbacks #3 Reversals #4 Fakeouts (#5 Macro) As you will see, each trading strategy and style tries to capture different market behavior. This is also going to be one of the main take-away points because I’m a big believer in specialization. Instead of trying to trade all the time, you should pick a specific market behavior and then try to excel at it. #1 Trend-Following Trading Strategy Trend-following is an approach that most traders experience first hand, and sayings like “the trend is your friend” have been around for decades. Trend-following, as the name suggests, is a trading style where the trader has to wait for an established trend before he/she jumps into the market. Thus, trend following traders have to wait patiently until the actual trend becomes clear. The screenshot below shows part of the market moves that are typically taken by trend following traders. Red areas highlight market turning points and blue areas are downtrend phases. Many amateurs make the mistake of trying to predict a new trend before it exists and enter too early. Those traders, although they think they are trend traders, are actually reversal traders. Then, there is also a difference between early and late trend following. Since trend following traders need to wait until the trend is confirmed, the question that comes up is when is the trend confirmed? Traders following the initial trend try to enter the new trend as soon as possible which may result in too early and run into false signals. The advantage is that the potential reward/risk ratio is much higher. Late trend traders await further confirmation. It may, of course, happen that they are too late, but their signs are often strong. The trade-off is that the reward/risk ratio is not as high while the winrate is high. When it comes to trading tools, a trend following trader can choose from a variety of options. Momentum indicators such as MACD, RSI or STOCHASTIC are often popular. In the screenshot below, the STOCHASTIC is plotted and one way to trade the bottom is to wait until the STOCHASTIC reaches the lower or upper area. Many traders make the mistake of believing that this can give a contrarian signal which is totally wrong. A very high or very low STOCHASTIC indicates a strong trend. Of course, moving averages are another popular trend following tool. The two moving averages work perfectly as a cross-over signal in the screenshot below. Whenever a moving average is crossed, a new trend begins. The great thing about such a cross-over system is that traders avoid picking tops and bottoms automatically because it takes some time to cross the moving average. The Ichimoku indicator is another trend following tool. It is similar to the moving average cross-over system but the space is different. A classic Ichimoku entry is given when the price breaks through a “cloud” when two Ichimoku lines are moving in the same direction. #2Pullback Trading Strategy A pullback is a different type of trend following trading. Pullback traders look for established trends and trade so-called correction phases. A correction is a price movement in the opposite direction of the underlying trend. In the screenshot below, the market was in an uptrend and pullbacks (corrections) are short periods where the price moved sideways or against the direction of the trend. Price usually moves in waves up and down and the pullback trader uses this characteristic to time his/her trades. A pullback trader either waits for price to continue in the direction of the trend or enters a trade when the market moves lower. The danger with the second approach is that the pullback will not reverse. But the upside is that the reward/risk ratio can be high. The market does not always provide pullbacks. The example on the left shows a market where the price just dropped but never pulled back. The second and third phases had multiple pullbacks and offered good entry opportunities for pullback traders. As you can already see, pullbacks and trading following trends have a lot of overlap and trend following traders often trade pullbacks as a natural progression as well. Of course, there are many different ways how a pullback can form on your chart. In the screenshot below, there are 3 examples. Price bounced back to the level 2 times before continuing the double pullback trend. A dirty pullback price overshoots the previous high point and causes a deep correction. The immediate pullback price stalled at the breakout level and briefly moved sideways before resuming the trend direction. Moving averages are also a popular tool for pullbacks. When the price is in a trending market and then returns to the moving average, a pullback trade can occur. Either, the trader trades the price when it hits the moving average or he/she waits until the price resumes the direction of the trend. As we will see when we talk about breakout trading, we can also trade price formations called pullbacks. In the screenshot below, the price was in a clear downtrend when the head and shoulders formed. In such a context, a head and shoulders formation becomes a trend following pattern and can be considered a pullback. The lines between pullbacks and trend-following are blurred here. #3 Reversal Trading Strategy A reversal is a turning point and a reversal marks the true origin of a new trend. Therefore, reversal trading can also be considered as a very early trend after trading. However, it is usually more effective to choose between classic trend following and reversals as each trading approach has its own unique characteristics. The screenshot below shows a chart with different market phases and trend phases. Trend following traders will usually go for an early or mature trend. A reversal trader starts paying attention to the market when the market enters a mature trend phase. This usually happens after at least 2 or 3 trend waves have formed. The dangers of being a reversal trader are being too early and constantly operating in a contrarian mindset. Many failed reversal traders are trying to predict a market turn way before it happens. Greed is driving traders here because they believe that the earlier they are, the closer they can enter the absolute top/bottom and, therefore, get a much larger reward/risk ratio. When it comes to reversal tools, divergences are a classic confirmation. RSI divergence shows tired trends where trend strength is waning. When a mature trend gives you an RSI divergence, a reversal can often occur. The RSI is usually a trend indicator, but when the RSI shows that the trend is losing strength, it can also work very well as a reversal tool. MACD or STOCHASTIC can also be used as reversal tools. I see myself as a classic reversal or very early trend-following trader. I was never comfortable chasing a trend as a trend-follower and once I realized that a reversal doesn’t mean predicting a turn before it happens, reversal trading became a “fun” way to trade. #4 Breakout Trading Strategy Breakouts can occur during trend following and also during reversal trading. Breakout periods are often the link between two trending phases. A breakout describes a departure from a consolidation pattern. Consolidation patterns, as the screenshot below shows, can occur during market turning points (tops and bottoms for reversals) or established trends. The screenshot below illustrates how consolidation and breakout are links between two market phases. Consolidation can occur at market turning points and breakouts are trend reversal signals. If consolidation occurs during an established trend, the trend follows a breakout signal. This screenshot below once again highlights this characteristic and it becomes clear how breakouts connect different phases of the market. As a trader, it is usually best to choose a specific type of breakout. Trying to trade all breakouts can lead to bad results and confusion because each market phase behaves differently and thus, requires a different set of tools, signals and understanding. Breakout traders are pattern traders and breakout traders usually find

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