I believe in the power of this forum to change our trading life to the better and to the worse. There are people who put their hearts and souls to help us to be a better trader. There are trollers, nay sayers, false gurus, haters, the loud & the clueless, etc who purposely or accidentally lead us astray. It totally depends on us to separate the gem from the junk.
I say let's focus on the positive side and do everyone a favor, especially beginners, in this case by pointing them in the right direction to profitable trading. This is the sole purpose of this thread.
I would like to invite all profitable traders to share ONLY about their general methodology. Everyone should respect the fact that every profitable trader has the right to keep their edge as their own secret, unless they are generous enough to share it by their own freewill. So please do not ask anyone who share their profitable methodology any details of their strategies.
And this thread is not an excuse to attack or ridicule other people's way of trading. If it is profitable for them, then they don't need your validation. And ridiculing what eventually turns out to be true reflects badly on yourself.
So I'll start the ball rolling and here goes my own findings:
I've been trading forex for a substantial amount of time. I trade on and off. Demoing and live trading. But my studying goes much further back and never stops. I love forex like the way someone falls in love in solving a Rubik's Cube. It is a grand puzzle I'm determined to solve. And from my years of studying forex, I can vouch for the following general strategies out of millions of strategies out there. There are ENDLESS variations among each category but I think these are the creme de la creme of forex strategies category:
1) Price Action Trading
Price is king and your P&L is directly affected not by your indicators, but price alone. This is trading almost naked and using price patterns solely to determine entry and exit. PA traders use price as a leading indicator. The basis of this trading is that price patterns repeat itself because there are repeated human behaviors. For PA traders, anything that hinders the view of the price itself on the chart is detrimental to their trading. This is why they would never use indicators such as heiken ashi, 3 line break, or anything else that superimpose the price view. To PA traders, price is the only way you can understand the market movement.
2) Trend Trading
The basis of this trading is that price historically often moves in a trend. There are only 3 basic movements in forex market: Uptrend, downtrend, and sideways. Trend traders take advantage when price is moving up or down, but suffers when price stagnates or consolidates. They rely heavily on trending indicators to get rid of the noises visible on the chart. Any indicators that would cover up the actual price and only gives the general direction of the price is highly sought after by trend traders. But all trend indicators are lagging indicators. And those trend indicators that try to predict the future by any kind of calculation never achieve consistent profit.
3) Breakout/Support and Resistance/Supply, Demand, and Volume Trading
The basis of this trading is that price historically often either breaks out of a consolidation period, or bounce out of certain levels. Both BO and S&R traders believe in certain price zone where price will either break through or bounce. BO traders take advantage of this by straddling their position on the edges of the consolidation period. S&R traders take advantage of this by trading the price reaction on certain levels, taking into account possible overbought and oversold areas. They rely heavily on the understanding of supply, demand, and volume, what causes the consolidation/S&R levels, what are the indications when breakout/bounce is about to happen, and to which direction will the breakout/bounce go to. They use limited number of indicators as confirmations because they trade mainly with understanding.
4) Divergence Trading
The basis of this trading is that the movement of oscillating indicators often doesn't follow the real price movement. Price can make higher peaks while the indicators are making lower peaks. These inconsistencies often lead to good trade signals. Divergence traders rely heavily on the use of indicators as their main decision to enter and exit a trade. They are consistently looking for better indicators which display accurate divergence and hidden divergence. They often use multiple oscillating indicators as added confirmation.
5) Basket Trading
The basis of this trading is that there are trade-able correlations between currency pairs. These correlations are not 100% consistent but when certain pairs move in one direction, associated pairs often generally follow. They are applying trend trading to multiple currencies. So basket traders are jugglers. They see multiple charts at one time and make decisions based on multiple inputs. They can trade a single currency or multiple currencies simultaneously. Their biggest challenge is understanding when the traditionally related pairs are most likely to move in unison. Just like trend traders, they often use lagging indicators to determine the trend of multiple currency pairs. And sometimes when they realize that all associated pairs are moving in one direction it is to late to get it as the pairs have moved their own ways again.
*) Combo Trading
This is the jack-of-all-trades traders. They combine anything they find to be working. They often suffer from information overload and analysis paralysis because different methods are giving them conflicting signals. This type of trading requires tremendous focus and hard to do for beginners.
*) EA Trading
These traders have found their edge and automate their strategies by using a robot to do their trades. It still requires human intervention and monitoring. I have yet to find a robot that works all the time and consistently profitable.
So that's my own findings. This is by no means an exhaustive list and it is open to discussion. And of course boundaries often overlap, so most of the time people combine just enough methods to find their own edge.
I found other well known strategies not to be consistently profitable: Martingale, Grid system, Hedge system, etc. Arbitrage, although risk free, is quite advanced and may not be accessible to most retail traders.
I encourage you all to share your general methodology, make trading easier for everyone, and make FF the best forex forum in the world.
I say let's focus on the positive side and do everyone a favor, especially beginners, in this case by pointing them in the right direction to profitable trading. This is the sole purpose of this thread.
I would like to invite all profitable traders to share ONLY about their general methodology. Everyone should respect the fact that every profitable trader has the right to keep their edge as their own secret, unless they are generous enough to share it by their own freewill. So please do not ask anyone who share their profitable methodology any details of their strategies.
And this thread is not an excuse to attack or ridicule other people's way of trading. If it is profitable for them, then they don't need your validation. And ridiculing what eventually turns out to be true reflects badly on yourself.
So I'll start the ball rolling and here goes my own findings:
I've been trading forex for a substantial amount of time. I trade on and off. Demoing and live trading. But my studying goes much further back and never stops. I love forex like the way someone falls in love in solving a Rubik's Cube. It is a grand puzzle I'm determined to solve. And from my years of studying forex, I can vouch for the following general strategies out of millions of strategies out there. There are ENDLESS variations among each category but I think these are the creme de la creme of forex strategies category:
1) Price Action Trading
Price is king and your P&L is directly affected not by your indicators, but price alone. This is trading almost naked and using price patterns solely to determine entry and exit. PA traders use price as a leading indicator. The basis of this trading is that price patterns repeat itself because there are repeated human behaviors. For PA traders, anything that hinders the view of the price itself on the chart is detrimental to their trading. This is why they would never use indicators such as heiken ashi, 3 line break, or anything else that superimpose the price view. To PA traders, price is the only way you can understand the market movement.
2) Trend Trading
The basis of this trading is that price historically often moves in a trend. There are only 3 basic movements in forex market: Uptrend, downtrend, and sideways. Trend traders take advantage when price is moving up or down, but suffers when price stagnates or consolidates. They rely heavily on trending indicators to get rid of the noises visible on the chart. Any indicators that would cover up the actual price and only gives the general direction of the price is highly sought after by trend traders. But all trend indicators are lagging indicators. And those trend indicators that try to predict the future by any kind of calculation never achieve consistent profit.
3) Breakout/Support and Resistance/Supply, Demand, and Volume Trading
The basis of this trading is that price historically often either breaks out of a consolidation period, or bounce out of certain levels. Both BO and S&R traders believe in certain price zone where price will either break through or bounce. BO traders take advantage of this by straddling their position on the edges of the consolidation period. S&R traders take advantage of this by trading the price reaction on certain levels, taking into account possible overbought and oversold areas. They rely heavily on the understanding of supply, demand, and volume, what causes the consolidation/S&R levels, what are the indications when breakout/bounce is about to happen, and to which direction will the breakout/bounce go to. They use limited number of indicators as confirmations because they trade mainly with understanding.
4) Divergence Trading
The basis of this trading is that the movement of oscillating indicators often doesn't follow the real price movement. Price can make higher peaks while the indicators are making lower peaks. These inconsistencies often lead to good trade signals. Divergence traders rely heavily on the use of indicators as their main decision to enter and exit a trade. They are consistently looking for better indicators which display accurate divergence and hidden divergence. They often use multiple oscillating indicators as added confirmation.
5) Basket Trading
The basis of this trading is that there are trade-able correlations between currency pairs. These correlations are not 100% consistent but when certain pairs move in one direction, associated pairs often generally follow. They are applying trend trading to multiple currencies. So basket traders are jugglers. They see multiple charts at one time and make decisions based on multiple inputs. They can trade a single currency or multiple currencies simultaneously. Their biggest challenge is understanding when the traditionally related pairs are most likely to move in unison. Just like trend traders, they often use lagging indicators to determine the trend of multiple currency pairs. And sometimes when they realize that all associated pairs are moving in one direction it is to late to get it as the pairs have moved their own ways again.
*) Combo Trading
This is the jack-of-all-trades traders. They combine anything they find to be working. They often suffer from information overload and analysis paralysis because different methods are giving them conflicting signals. This type of trading requires tremendous focus and hard to do for beginners.
*) EA Trading
These traders have found their edge and automate their strategies by using a robot to do their trades. It still requires human intervention and monitoring. I have yet to find a robot that works all the time and consistently profitable.
So that's my own findings. This is by no means an exhaustive list and it is open to discussion. And of course boundaries often overlap, so most of the time people combine just enough methods to find their own edge.
I found other well known strategies not to be consistently profitable: Martingale, Grid system, Hedge system, etc. Arbitrage, although risk free, is quite advanced and may not be accessible to most retail traders.
I encourage you all to share your general methodology, make trading easier for everyone, and make FF the best forex forum in the world.
