What is the Best Forex Trading Strategy?

Trying to determine what the “best” forex trading strategy is, can be an intimidating task for the beginning forex trader. The truth of the matter is that there really is no single forex trading strategy that can be universally considered to be the “best”. There are however certain characteristics that forex trading strategies share that put them into the category of “effective” trading strategies.

What you truly want is a simple forex trading strategy, the reason why is clear; forex success does not depend as nearly as much on the particular trading strategy you implement as it does on how well you manage your risk and your emotions. Most traders spend too much time on their trading strategies and not nearly enough time on learning about risk management and trading psychology. This is not to say that the particular trading strategy you use has no bearing on your overall success or failure as a trader. It just means that you can become a successful forex trader without using a super complicated or expensive trading strategy, contrary to what many beginning traders believe.

One simple trading strategy that can also be a very profitable forex trading strategy is the technique of using simple price action setups to enter the forex market. This strategy has been around for centuries, since the 1700s when Japanese rice traders used candlestick price action setups to predict the movement of rice prices. So, we know that price action trading is effective because many traders over the years have profited using this strategy. What truly makes price action trading effective however is not the actual strategy itself, but how well the trader using it understands risk to reward and self-discipline. Price action can provide you with high probability entries into the market, but if you do not know how to properly manage your risk and you over-trade, you will lose money. So, we can see that even a profitable forex trading strategy like price action can lose money if a trader’s mindset is not right.

You should also aim to trade a forex strategy that allows you to successfully trade off higher time frame charts. Learning to trade off the daily charts before moving to any lower time frame is essential to get a feel for how the market works and what a quality trade signal looks like. Too many traders begin trading on the lower time frames and as a result of this they start over-trading and over-leveraging their accounts almost immediately. The lower time frame charts inherently contain more noise and random and meaningless price movement than the higher time frames do. The higher time frames, like the daily chart, allow you to get a clearer picture of what the markets are doing and where they might go next, essentially the higher time frames work to “filter” out the noise and confusion of the lower time frames. So, the best forex trading strategy will give you the power to successfully trade off the daily charts without having to over-analyzing the lower time frames.

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