Forex Strategies That Actually Work
When the trader starts trading they will hopefully have studied Forex and will want to apply strategies they have encountered. What they can find is that strategies don't seem to work (i.e. the market does not seem to express the conditions needed for strategy clearly or even at all). So the trader may think that they do not understand the strategy and try others or try and refine the strategy. For example they may trade on RSI signals and filter the trade with a moving average. What can result is this just adds further complexity to the outcome as the moving average signal does not seem to either confirm or deny the RSI signal. So why is this happening and are there Forex strategies that actually work.
The reason is is happening is related to the nature of the Forex market. It is subject to many influences which push it in different directions, which result in trends, ranges and volatile moves. When looking at the chart (that is what has happened in the past) the trader can see clarity, they can see clear patterns forming. But this map of the market is the result of many influences and could have been written in many different ways. When the trader actually trades they are facing at each moment this tendency for multiple outcomes. Thus they turn into patterns which turn into something else and trade on signals which do not work out as they are based on outcomes which do not happen. Then they find that patterns does work out but they are not in on it or exit too early, since they have learned caution from patterns which do not work out, and then enter too late, for example near a trend end.
With a well capitalised account and risk management it can be possible to ride out the patterns which do not work, but this is a level of commitment and capital which many traders may not have. Thus what happens is that their capital gets eaten away and traders stop trading. They may well study more and come back into the market with renewed enthusiasm for a strategy and find the same thing happens. They may try using robots which trade on their behalf or copy trading but find that they cannot withstand the drawdown. They may try social trading and use signals by more experienced traders, but may not have the capital for these moves.
One way forward is to try and emulate a well capitalised trader, but reducing trade sizes down to below micro lots, for example on a MetaTrader 4 or 5 cent account or with a broker which allows very small minimum order sizes. The trader may then find that they see Forex in a new ways and understand that strategies are not designed to give an desired outcome on demand. However the trader may wish to understand the market more clearly and see why strategies do not work. They can look for regularities and the effect of liquidity. So rather than focusing on a set of rules, they can use the market as a guide as to what rules may or may not work. This is a strategy which grounds trading in the ebbs and flows of the market. They may study Forex pairs and see what kind of behaviour may be expected form them and what may not be. Some Forex pairs can show a wide range of patterns but may be very volatile and they may wish to choose a Forex pairs based on the way they feel comfortable trading.
A key structure in the Forex market is based on value levels and the trader may see that a pattern is not forming or is ending because for example it is being determined by the effects of a big figure. This kind of more fluid approach to trading is less rule based, but then the problem is with the application of rules to this market, unless the trader can withstand deep adverse moves and plough through with their strategy for example by using a robot. However they will find that even robots stop working and can depend on market conditions which can change, which is the case for all strategies.
