Forex Strategies

When it comes to selecting strategies to trade, you have the choice between buying one off-the-shelf or trawling the Internet for freebies. The trouble with free forex trading strategies is that they are usually worth about as much as you pay for them. They haven’t been tested, and there is little evidence of their reliability. But not all of the following strategies are equal in all markets. Some perform better than others, and each individual trader will find some strategies more suitable for them to trade than others.

1. The Bladerunner Trade

The Bladerunner is a forex price action strategy trading strategy that uses pure Price Action to find entries. We use candlesticks, pivot points, round numbers and good old support and resistance levels when trading this strategy. No off-chart indicators (those appearing below the chart window in their own window, e.g. RSI, stochastics, MACD etc) are necessary, but you may include your favourite if you find it useful or feel more comfortable having some extra confirmation. Some people might wish to incorporate Fibonacci levels and that’s fine, too. The only indicator I do use with this strategy is an on-chart indicator, the 20 EMA. An alternative is to use the midline of the standard 20 Bollinger bands. Either works well, in fact you can use both to trade it as a Bollinger band EMA strategy. The examples here will be using the 20 EMA. This setup can be traded on any pair. It can also be traded on any time frame, but the examples below are from 5 min charts. It can be traded at almost any time of the day, but obviously some times are more reliable than others. For example, the early part of the Asian session may provide a decent break out and retest giving an entry, whereas the Asian afternoon session can be very slow. Then, when London opens the price may be too erratic and volatile to give any reasonable entries for any strategy. Later again, after the initial flurry of news announcements has passed and price has settled, you may once more get a reliable entry or two. You will therefore have to adjust this strategy to the times when you are able to trade it. The strategy is named Bladerunner because the 20 EMA acts like a knife edge dividing price. If price is above the EMA, and respecting it, and retests the EMA, it will likely reject to the long side. And if price is below the EMA, and respecting it, and retests the EMA, it will likely reject to the short side.

2. Daily Fibonacci Pivot Strategy

The Daily Fibonacci Pivot Strategy uses standard Fibonacci retracements in confluence with the daily pivot levels in order to get trade entries. My preferred parameters are the 38% or 50% Fibonacci levels in confluence with the daily central pivot. The examples following show entries at the 38%, 50% and 62% Fibonacci retracement levels in confluence with the daily central pivot. As with all free forex strategies, there are many possible interpretations and variations. My particular take on this strategy is as follows: look for an entry on any currency pair where the average true range for the last five day period has been exceeded in the previous day’s trading session at the start of the current trading session draw fibs:
– from the previous days low to high, if price is currently above the current day’s central pivot
– from the previous day’s high to low, if price is currently below the current day’s central pivot
look for a confluence of Fibonacci retracement levels with the daily central pivot If price retraces to the confluence identified, either enter at market or wait for a confirmatory candle signal to occur at the confluence before entry. Obviously, it is more risky to enter before getting the confirmatory signal, but such an approach gives a greater possible reward to risk ratio.

3.Bolly Band Bounce Trade

Trading an obvious trend is a lot more straightforward than trading when price is range bound, or appearing to move sideways. Many traders actually pass on the possibility of trading at all in a range bound market, standing aside until price once more takes on a definite trend. There are however strategies for coping with this much more restricted range of price movement. This free strategy is offered as one such approach. The Bolly Band Bounce is based on the observed behaviour of price where the Bollinger bands form a kind of limit for short-term price movement. In this respect Bollinger bands are well named, in that they almost exhibit the elasticity characteristics of rubber bands. Price will approach an outer band, encounter resistance and snap back towards the opposite band. One way to make use of this behaviour is to trade the bounces at the outer bands. This is not very effective in a sharply trending market, but when the market is in a range it can be very effective indeed for short-term scalps. The first thing you must do when looking to trade this strategy is to determine that price is indeed in a range. There are many ways to do this but with Bollinger bands I find the simplest is to check if price is staying on one side or the other of the mid-band. If so, and price is making consistently lower lows then price is trending down. And the opposite of course applies for an uptrend: if price is staying above the mid-band and making consistently higher highs then we are in an uptrend.

4. Trading The Forex Fractal

The fractal as used here refers to areas of price channelling and consolidation that are being watched by large numbers of forex traders. More importantly, the boundaries of those channels are being watched by the Big Guns in the market, thus forming levels of support and resistance. The dictionary definition of fractal is “A geometric pattern that is repeated at ever smaller scales to produce irregular shapes and surfaces that cannot be represented by classical geometry”. As in Fibonacci sequences, it’s a fact in nature, art and also trading, that patterns repeat. Pick a pattern on a five-minute forex chart and you will find the same pattern repeating on higher timeframes, very often “nesting” within the same timespan on the higher timeframes. At this stage you might be asking what is the difference between a fractal and a simple price channel? The two distinguishing features I see are:
1. It’s simple enough to identify a single price channel on a chart, but once you start stacking fractals on top of one another you begin to see that price is actually fracturing or ‘fractalling’ along a trajectory, either bullish or bearish. This is far more powerful information, as it gives an indication of the Trend, and how far price, when it breaks out from a fractal, might surge before it withdraws back into the body of the fractal. For example, if the fractals are each averaging about 50 pips from the lower edge to the top edge, then if price surges through in either direction we could expect that it would not go much further than 50 pips to begin with. This enables us to set stops and take profits with a little more certainty.
2. Once you study the fundamental aspects behind the construction of price fractals, you see the market and its price action dynamics with far more clarity. The fundamentals of fractal price action are tied up in the order flows coming out of major financial centres: the banks and trading houses and other major players.