There are several strategies, which forex traders use in order to be successful when trading. However, not all are successful, the reason being the difference in trading temperament and style. Moreover, certain strategies work well in given conditions while fail at other times. Therefore, it is important for traders to understand which strategies to use. For this, they ought to know the relevance and use of each of these strategies and the way these can be used to the maximum advantage.
Therefore, certain features, which forex trading strategies should possess, are as follows:
Teaches something useful
Trading strategies do not simply mean signals for entry to and exit from the market. They are much more than that. The trading strategies that work are actually those that give an insight in to the way the price dynamics work and in to the global economic picture. It shows the traders the reason of the present economic picture. Once the trader understands, the concept of the price dynamics, he can effectively interpret and use the concept to his advantage. He would be able to predict the price movement of the currencies more effectively.
Adapt to different timeframes and changing market conditions
The forex is a highly volatile market and therefore there are unprecedented changes. No particular strategy can be used in all conditions. The automated trading systems do not have the ‘gut’ feeling to predict the price changes. This is something, which comes after years of experience and practice. Therefore, a perfect strategy that works is the one, which can adapt to different market conditions and timeframes. One such strategy is the price-action analysis strategy under which the traders do not use any price charts or indicators to analyze or predict the movements in the price. Human discretion is the basis of this strategy and it adapts to changing market conditions and timeframes.
Provides high probability market edge
A forex strategy which provides a high probability edge in a given market condition is considered to be a successful strategy. For this reason, certain strategies like trend trading, moving average bounces, candlesticks, support and resistance levels, and many more have been in the market for long. These strategies have been able to provide an edge and give the trader the ability to pick out opportunities and high probability setups.
Teaches fending for yourself
Successful forex strategies are those that are able to teach the trader the methods of trading and spotting opportunities rather than spoon-feeding him with trading signals. These strategies give an insight into the market and make the trader understand the price dynamics so that he may use it to his advantage.