What is the best forex trading strategy?

In my opinion there is no such thing as a best Forex trading strategy. There is no one size fits all. Determining what the best Forex trading strategy for you is depends on several factors and conditions, such as:

What is your risk tolerance?
What are your financial objectives?
What is your personal philosophy about money?
How much time can you personally devote to trading the forex markets?
Are you looking for quick profits, or are you taking a longer term approach?


There are potential advantages and disadvantages to different trading strategies. Some people take a strictly mathematical approach to the market, trying to predict where it is likely to go over a set time in the future. This may be for a few minutes, an hour, a day, a week, a month, or longer. A word of caution here if you are thinking more in terms of long periods of time, such as weeks or months…keep in mind that the Forex market is not so much like investing in the stock market in this regard. As a rule of thumb, with stock trading the objective is to find one or more stocks that look promising based on several factors with the goal in mind that you will stick with that stock until the company has had time to grow, thus making your stock more valuable as time goes by. Trading in currencies is, in my opinion, an entirely different type of financial vehicle. Some people may not even think of it as an investment, but a more speculative type of transaction. Some people think trading currencies is like rolling the dice or pulling the lever, a pure random chance. I do not personally think of trading Forex in these terms. It can certainly be an investment, if treated like one, and while it operates in a different financial realm than stock trading, it can certainly be a vehicle that can help you achieve some financial goals.
Why is trading Forex so much different than stocks? There are two main reasons that I can see. One difference is that you are not waiting for a company to grow to make your investment worth more. You can start receiving cash flow and increased account size almost from day one. Granted, the opposite can also happen, but that can also be the case with stocks…they can go down in value as well as up, and often do. The second big difference is that you can trade currencies in either direction, up or down. To the beginner, this may seem downright strange, but once you study it a bit it becomes more clear as to why that is. So no matter what direction a particular currency pair is moving that gives you an opportunity for profit. You really don’t care which one is going up and which one is going down because you get to choose, and if you choose correctly, you make money. It’s a bit like getting to switch teams in the middle of the game. If your team is winning you get to stay on that team, but if your team is losing you can switch to the winning team. How cool is that!? This may sound a bit like cheating and really unethical to some folks. Of course it would be in the sports world, but not in the world of foreign currency exhanges.

Forex Trading Strategy

Now back to the different currency trading strategies, and which ones may work best for you. If you have very little to no time to learn or be personally engaged in trading the Forex, but you like the idea of potentially much larger returns than you can get on more traditional investments, such as CD’s, then you might want to consider looking in ETF’s (exchange traded funds), or you might even want to look into finding an individual or company that will engage in the Forex on your behalf for a fee or commission.


However, if you want to personally learn and engage in trading the Forex markets yourself, then you will want to determine just what kind of approach you want to take. For instance, some people spend no more than a few minutes a day (usually at the end of the trading day for your area – say 5pm EST in the U.S.) and determine what kind of trade to make for the next day. Others may stay actively engaged in looking at the charts from minute to minute for an entire 8 hour day, while still others may take a subset of this approach and stay in the market, actively watching the charts, for only a short period of time such as 1 hour, or maybe 2 or 3 hours, and then get out of any trades they are in (hopefully with a profit) and not get in again until they feel like there is an opportunity for profit or their schedule allows it.


None of these are either right or wrong. It just depends on the individual. Now let’s look at a potential real life situation or two to give you a better idea of what I’m talking about here.


Let’s say you’re someone who only wants to spend a few minutes a day planning a trade for the next day. Just how do you do that? It’s easy enough to look backwards and say, “Well, the market went in a certain direction today so therefore it will again tomorrow”. If it were truly that easy there would be no risk, and no losers, in the Forex market. So what you need to learn about are several different indicators combined with a money management strategy to minimize your risk should the market move against the odds and against you.


Now let’s assume that you’re someone who has the time and the desire to be more involved and you can “watch the screen” for a copule of hours a day. A very important first question would be, just which two hours of the day did you have in mind? There are certain time periods when the market is more likely to move than others, so if your two hours are during a really slow time you may not have much success. However, if you can actively trade with eyes on the charts during a time there is sufficient movement in the market to present opportunities, then there is a whole different set of criteria that you should learn and a completely different mindset is involved as compared to the above scenario of trading only once per day. Trading this way may mean you get in and out of multiple trades, or it could be that you are still only attempting to trade just once, but at the best possible time during this two hour period for maximum potential gain. A likely scenario is that during a two hour time frame the market could very well swing significantly in both directions and you need to be astute enough to know when to get in, when to get out, or when to just stay out altogether because of excessive volatility, and wait for better conditions the next day. I will attempt to get into more detailed real life scenarios in upcoming articles, but I hope this has helped to get you thinking about what trading strategies might be best for you. You might want to look into more indepth Forex Training to help you decide what trading strategies would work best for you.