Most profitable forex trading strategies | LiteFinance (2024)

Every trading manual or instruction insists that a trading strategy is necessary for successful trading. First of all, when you select your forex strategy you gain greater clarity of the trading process, which helps minimize trading risks.

Profitable Forex strategy is an instruction. A trader faces high risks without using any system or plan. If a trader follows it strictly, he/she will avoid many mistakes. The market is hard to predict, and it often results in trading mistakes.

Your forex strategy will tell you what you should do in various changeable market conditions. Your trading strategy should be suited for any situation.

You won’t try to guess when to enter or exit a trade. Your trading strategy will prompt you when you need to enter or exit the market. It doesn’t mean that even the best forex trading strategy can’t be changed. But it mustn't contain any unjustified elements.

Major takeaways

Types of forex trading strategies

Trading strategies can be based on various tools. The most popular trading strategies are:

• Trading strategy based ontechnical indicators
• Trading strategy based onBollinger bands
• Trading strategy based onmoving averages
• Trading strategy based ontechnical analysis and price patterns
• Trading strategy based on Fibonacci retracements
• Candlesticktrading strategy
• Trend trading strategy
• Flat trading strategy
• Scalping
• Trading strategy based on the fundamental analysis

Three most profitable Forex trading strategies

Important! These strategies make up a basis to develop your own forex trading strategy. The suggested setting and recommended levels to put pending orders are nothing more than a recommendation.

If you do not like the backtesting or the performance on a real account, the strategy may not be a fail. You just need to find individual parameters for indicators suitable for a particular asset or a current market situation.

• Note! The description of each strategy contains its template with indicators and a brief instruction for their installation.At the end of the article, there is a separate section devoted to practical recommendations. It explains how to launch these templates in real trading and start making money with LiteFinance! If you are interested in a strategy, open a demo account with LiteFinance, and follow the recommendations given in this overview. If you have any questions, feel free to ask them in the comments!

1. Scalping strategy “Bali”

This strategy is quite popular, at least, you can find its description on many trading websites. However, Internet resources suggest different recommendations concerning the Bali trading strategy.

According to the developer, Bali is a scalping forex strategy, or at least, it is designed for short term time frames. It is also good for day trading. It suggests quite short stop losses (SL) and take profits (TP). However, the recommended timeframe is rather long, and so, signals are sent quite rarely.

The developers recommend using the H1 timeframe and the EUR/USD currency pair.

Indicators used:

• Linear Weighted Moving Average. Period 48 (red line).

Linear Weighted Moving Average serves here as an additional filter. As the LWMA attaches more importance to the most recent price moves, there are almost no delays in the long-term timeframes.

Occasionally, the LWMA may send an early signal in the long run. But this strategy considers only the MA position relative to the price movements. If the LWMA is below, it is a buy signal. If the line is above the price, it is a sell signal.

• Trend Envelopes V2. Period 2 (orange and blue lines).

The indicator is also based on Moving Average, but it has a different calculation formula. Its layout is more accurate (the price noise is reduced).

It allows you to identify the breaks in the trend a little earlier than the ordinary MA. Trend Envelopes has an interesting property. The line’s colour and its location changes when the price breaks through its former trendline. It is a kind of trading signal.

• DSS of momentum. The settings are in the screenshot below.

The indicator is displayed in a separate window under the chart. This is an oscillator that identities trend pivot points. It does it quicker than standard oscillators.

It has two lines: the signal line is dotted, the additional line is solid. But the receiving line has two types of colours (orange and green).

• Important! Note that the indicators in the Bali trading strategy are selected so that they provide an early signal buy and sell. This gives a trader more time to confirm the market moves and check the fundamental factors.

MA is a standard MT4 tool, the rest two indicators can be obtained for free in the archive viathis link. To add them to the trading terminal, in MT4, click on the “File – Open data folder”. Next, follow the directory MQL4/Indicators. Past the indicators into the folder and restart the platform.

Conditions to open a long position:

• The price breaks through the orange line of Trend Envelopes upside. At the same candlestick, the down orange line changed into the rising blue line.

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• The candlestick is above LWMA. When the previous condition is met, expect the candlestick above the MA to appear. The candlestick must close above the red line of LWMA. There must be the blue line of Trend Envelopes at the signal candlestick.

• The additional line of the DSS of momentum at the signal candlestick should be green. This line must be above the signal dotted line (that is, it is breaking it through or has already broken).

Enter a trade when the signal candlestick closes. I recommend setting a stop loss at a distance of 20-25 points in four-digit quote. A take profit is 40-50 points.

The arrow points to the signal candlestick where Trend Envelopes colours change. Note (purple ovals) that the blue line is below the orange and is moving (otherwise the signal should be ignored). At the signal candlestick, the green line of the DSS of momentum is above the dotted line.

Conditions to open a short position:

• The price breaks the blue line of Trend Envelopes downside. At the same candlestick, the rising blue line changes into the falling orange line.

• The candlestick is below LWMA. When the previous condition is met, expect a candlestick to appear below the moving average. It must close under the red line of LWMA. There must orange line of Trend Envelopes at the signal candlestick.

• The DSS of momentum additional line should be orange at the signal candlestick. It should be located below the signal dotted line (that is, it is breaking through it or has already broken).

A few cases when you shouldn’t enter a trade:

1. The below screen displays a candlestick that closed at the level of MA (the red line), almost fully below the line.

2. The below screen shows that the DSS is below its signal line at the signal candlestick. Besides, the blue line is flat, not rising.

Signals are relatively rare, you can wait for one signal for a few days. In 50% of cases, you’d better monitor the trade and exit it earlier, before the price hits the take profit. Do not trade when the market is flat. Test this strategy directly in the browser and assess the performance.

2. Candlestick strategy “Fight the tiger”

This is a profitable weekly trading strategy, which can be used for position trading with different currency pairs. It is based on the springy action of the price — if the price rose quickly, it should fall sooner or later.

We can use a chart in any terminal and a timeframe W1 (although you can also use a daily timeframe). You should analyze the size of the candlestick body of different currency pairs. There is a wide range of pairs: AUDCAD, AUDJPY, AUDUSD, EURGBP, EURJPY, GBPUSD, CHFJPY, NZDCHF, EURAUD, AUDCHF, CADCHF, EURUSD, EURCAD, GBPCHF.

Next, choose the pair with the longest distance between the opening and closing prices within the week. You will enter a trade on this pair at the beginning of the next week.

Conditions to open a long trade:

• The bear candlestick, indicating the price action for the previous week, has a relatively big body.

You enter a long trade at the beginning of the next week. You should set a stop loss at a distance of 100-140 points and a take profit - at 50-70 points.

In the middle of the week, exit the trade. It may be closed with a take profit or a stop loss. Then, again expect the beginning of the week and place a new order. Do not place orders at the end of the week.

It is clear from the chart that, following each bearish candlestick, there is always a bullish one (although it smaller).

The matter is that what period you should take to compare the relative length of candlesticks. It is individual for each currency pair.

Note that some small bear candlesticks were followed by rising candlesticks. However, according to risk management, you shouldn’t open acounter-trade(a longtrade). The relatively small fall, occurred in the previous week, may continue.

Conditions to open a short position:

• The bullish candlestick, indicating the action during the previous week, has a relatively big body.

Open a short position at the beginning of the next week.

Red arrows point to the candlesticks that had large bodies relative to the previous bullish candlesticks. All signals were profitable except for the trade that is marked with a blue trade. The disadvantages of the strategy are rare signals, although the percentage of profit is quite high. And you can launch the strategy trading multiple currency pairs.

This strategy has an interesting modification based on similar logic. Investors, day traders, working with a trading volume prefer intraday strategies. They do not have enough money to make a strong influence on the market.

So, if there is a strong market action in the weekly chart, this signal the pressure made by big traders. Differently put, if there are three weekly candlesticks in the same direction, the fourth candlestick should be in this direction too.

The psychological factor is also important here. 4 candlesticks are equal to the period of one month. Those, who have been pushing the market in one direction, should start taking the profit in a month.

Strategy principle:

• There is a “three candlesticks” (rising or falling) pattern in the weekly chart.

• It is good if the next following candlestick is bigger than the previous one. Doji candlesticks (candlesticks without bodies) are not taken into account.

• A stop loss is set at the close level of the first candlestick in the sequence. The take profit is 50%-100% of the last candlestick, but it is often better to exit the trade manually.

An example of such trade setups is in the screenshot below.

4 patterns out 5 are profitable. Thestrategy’s drawback is that you can wait for a pattern for quite a long period of time. It can take 2 or 3 months.

But if you launch the strategy on multiple currency pairs, this term of expectation is justified. Take swaps into account!

3.“Profit Parabolic” trading strategy based on a Moving Average

The strategy is referred to as a universal one, and it is often recommendedas the best Forex strategy for consistent profits. It employs the standard MT4 indicators, EMAs (exponential moving averages), and Parabolic SAR that serves as a confirmation tool.

This is a trend strategy. Most sources suggest using it in different timeframes, including minute ones, but market noise lowers its efficiency in very short timeframes. It is better to use timeframes of М15-М30. You can trade any currency pair, but you may need to custom indicators’ settings.

Indicators used:

• EMA with periods 5, 25, and 50. ЕМА (5) is red, ЕМА(25) and ЕМА (50) are yellow. Apply to – close (closing prices).

• Parabolic SAR. Leave the default parameters (you can only adjust the colour if you want).

• Parabolic SAR. Leave the default parameters (you can only adjust the colour if you want).

Conditions to open a long position:

• Red ЕМА (5) breaks through the yellow ones from below.

• Parabolic SAR is below the candlesticks.

Conditions to open a short trade:

• Red ЕМА (5) breaks through the yellow ones from above.

• Parabolic SAR is above the candlesticks.

You can enter the trade at the same candlestick when the moving averages have crossed. A stop loss is set close to the local low, take profit is 20-25 points. But if you manage trades manually, you can make a bigger profit.

For example, you can exit the trade when ЕМА(5) becomes flat. It indicates a change in the slope from a rise to a flat.

It is clear from this screenshot that all the three signals (two longs and one short) yielded profit.

One could have entered the trade at the next candlestick. It is after the signal one (to be sure in the trend direction). However, a good entry point would have been missed.

It is up to you whether to risk or not. These parameters will hardly work for hourly timeframes. Therefore, you should always test the indicators’ performance for each timeframe using a period of at least three years.

Well, you are familiar with the theory now. I want to briefly describe how to launch these strategies in real trading.

Are you ready? Let’s get down to real trading in the Forex market!

From theory to practice

Step 1. Open a demo account. It is free, you do not have to top up the deposit. It takes about 15 minutes and doesn’t require verification.

On the website home page, there is the Registration button. Click on it and follow the instructions. You can also open an account in other menus. For example, in the upper menu, trading conditions for an account, and so on.

Step 2. Study the functions of the trader profile. It won’t take much time. It has a user-friendly, intuitive interface.

You need to study the instruments on the platform and find out how to make a trade. The trader profile is described in this overview.

Step 3. Open trading platform. In the client space, there is a built-in terminal but doesn’t allow adding any templates. So, the strategies like “Bali” or “Profit Parabolic” can be launched only in MT4.

3.1 Trading with MT4:

• Go to the METATRADER tab in the client’s profile, you can download it via the link (see the screenshot below).

• Download the template (just in case, I give the link again. The description of the strategy above explains how to set the template in the MT4).
• Try entering the trades according to the descriptions of “Bali” and “Profit Parabolic” strategies.

3.2. Trading with the built-in LiteFinance terminal:

• Adjust the chart visualization according to the description of the “Fight the tiger” strategy (currency pairs, timeframes). You can add indicators (add some indicators you like).

• Try to enter trades according to signals as it is described in the overviews.

Trading with LiteFinance is always efficient because:

• LiteFinance provides detailed descriptions of dozens of indicators and strategies. There are also the answers to your questions and the recommendations of professional traders.

• LiteFinance includes a professional trader blog, analytics, and a complex educational block. It provides all the necessary tools to develop your skills from a beginner to a professional.

• LiteFinance allows getting many pleasant bonuses and prizes, from the brand new gadgets to a car or even a dream house! You can learn more about the promotion here.

Try yourself! All you need is to just open a demo account via this link. Follow the instruction, and observe the recommendations offered in this article. Believe in yourself and do not be afraid of experiments!

Features of effective Forex strategies

And finally, let us see what features a profitable trading strategy has. What characteristics shout it have? I can define the three most important features of the effective trading strategy:

• Minimum lagging indicators. The less is lagging, the more accurate is the forecast. Forex trading strategies that work must not have lagging indicators.

• Simplicity. It is very important to understand the main principles of your trading strategy. It is better to be an expert on the simple strategy than to use complex strategies. It is very important to understand your forex trading strategy.

• Special features. A strategy should be adjusted to your trading style and methods, your personality, special circ*mstances, and so on.

It is very important to develop your trading strategy. However, first, you need to try many other strategies that have been developed and tested. In the Forex blog, you will find many working forex strategies that you can download for free. Before you launch a trading strategy, test the strategy on a demo account in the MetaTrader terminal.

Conclusion. To be a successful Forex trader, you should develop your own best profitabletrading strategy.

Get familiar with the latest Forex trading strategies, develop and improve your trading plan. Following this simple instruction will allow you to be satisfied with your trading performance.

I wish you successful trading!

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The content of this article reflects the author’s opinion and does not necessarily reflect the official position of LiteFinance. The material published on this page is provided for informational purposes only and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC.