What is the Best Forex Trading Method to make profits?

What is the Most Profitable Trading Strategy?

Forex trading strategies are adjusted according to time and require effort. They are based on analysis and trading tools, and most importantly, they are suitable for market conditions. Being familiar with several trading strategies will be more beneficial to your trading.

Below you will find a brief description of several commonly used trading strategies. But please note that you do not have to follow these strategies. No matter which strategy you choose, you can modify it according to market conditions. Before applying these strategies for real trading, you can test risk-free on a demo account.

What is the Most Profitable Strategy?

1. Position trading

Position trading is the opposite of scalping: it is a long-term strategy, and such positions can be held for days, weeks, or even months. Its main purpose is to obtain considerable profits by participating in a megatrend. It requires a correct understanding of the fundamentals and a deposit sufficient to maintain slight adverse price fluctuations.

When applying this strategy, please keep in mind that swaps will be charged for positions held for more than one day, also called overnight interest. In MT4, swap fees apply to all orders opened from 23.59 to 00.01 (server time). The exchange rate converter on LMFX Official Website provides overnight interest on long positions and short positions.

However, in cTrader, swap fees will be charged from your positions held from Friday to Monday.

How to efficiently perform Day, Swing and Position trading?

2. Hedging

It is a strategy that is often used to reduce risk in the event of unfavorable price fluctuations. A hedging transaction is to establish a position in the opposite direction of the previous position; in this case, the required margin is divided equally between the two orders.

However, even if these transactions are offset, you may still be at risk of huge losses. Since the buy order is closed at the buying price and the sell order is closed at the selling price, the spread of spread may increase the loss of the long and short positions.

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3. News Time Trading

Hundreds of financial news are released every day around the world. Although some news events have little impact on the market, others can cause shocks or increased volatility. News traders predict how the market will react to specific events.

An economic calendar is a major tool used by news traders to track upcoming news and predict how it will affect the market. All messages scheduled to be published in the current or next week can be filtered by influence, country, category and time. Because currencies are always traded in pairs, news involving both countries should be considered.

In the economic calendar, you will also find the forecasts provided by financial news agencies through surveys conducted by economists about their opinions on specific events. Release the data forecast more realistically, the move is clearer, and you can expect the difference.

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4. Scalping

Scalping is a trading strategy that allows you to benefit from small price fluctuations throughout the day trading. Scalper traders aim to obtain a small amount of profit per trade, rather than making a larger profit in a position.

Scalping is generally considered one of the most profitable strategies because smaller market volatility is more profitable and volatility occurs more frequently. In addition, it can reduce trading risks because the operation is carried out in a relatively short period of time. However, we still recommend combining this trading strategy with risk control and other factors because of the increased volatility caused by major news releases.

Scalpers often apply basic technical analysis to their strategies to determine market trends in the short term. For example, a trader can open a 2-point stop loss position and close the position once the price is close to a support or resistance level, pivot point or Fibonacci level, once the profit is 3 to 5 points.

Another important factor in considering the application of this strategy is the choice of a broker. Some companies simply prohibit scalping, reselling, or limit the minimum holding time. Low spreads and low execution delays are more beneficial to those traders who choose this strategy. LMFX provides attractive spreads, no trading commissions, and instant execution within 0.1 seconds.

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5. Grid trading

The grid trading strategy involves regular placing orders at a price level above and below a predetermined price. It does not require a clear prediction of the market direction and can be easily operated when there is no obvious trend.

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6. Martingale arbitrage strategy

Martingale arbitrage strategy is derived from the betting strategy based on probability theory in the 18th century. The basic principle is to double the bet when the bet loses; the last winning bet will win back all previous losses. The same principle applies to foreign exchange trading: when the trader uses this strategy without profit, the position will be doubled. If the market trend is not good for the trader, he or she doubles the position and waits for a breakout or reversal.

The Martingale strategy requires a relatively large deposit to fill the potential losses. In addition, this strategy may involve a lot of risks, and you may be forced to stop-loss and leave the market before you can win back your losses.

We hope you can understand that even with the most advanced and complex systems, you may encounter situations where you may misjudge market trends and trading signals. Please spend enough time studying any strategies before applying them to real trading.

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How to properly trade Forex during News Time?

We will introduce the basic price motivation of the foreign exchange market: financial news. Big banks, hedge funds and retail traders are all paying close attention to trading decisions.

Why should foreign exchange trading pay attention to news?

Countries around the world regularly publish statistical data, such as employment levels, gross domestic product (GDP), retail sales, and inflation levels.

These economic data usually reflect the economic health of a particular country and largely affect the currency price of a country. Currency is actually a confidence indicator for countries, so news releases usually trigger high market volatility and create multiple opportunities for traders.

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The most important economic data releases

Economic news releases will affect the market to varying degrees. Since the U.S. dollar accounts for approximately 90% of all currency transactions, economic news from the United States usually has the greatest impact on the market.

The most important economic indicators of any country are central bank interest rates, retail sales, inflation data, unemployment rate and industrial output value.

The initial market reaction to the press release usually lasts 30 minutes to 2 hours, but the broader impact can last for several days.

See upcoming important news

Choose which currency pair to trade

Major currency pairs (EUR/USD, GBP/USD, USD/JPY, USD/Swiss Franc) are the most liquid and have the smallest spreads, so they are the first choice for news trading. This helps to minimize risk during periods of high volatility.

Which is the Best Currency Pair to trade?

Use LMFX’s economic calendar

Many global economic calendars are available online, and the calendar lists economic news events of the day. Each data release is classified into high, medium, or low based on influence.

In addition, the calendar will list analyst forecasts (integrated forecasts) and previous values.

Traders will observe whether the actual data touches, does not meet or exceed the predicted level. Under normal circumstances, when the data and the analysis expectation are quite different, there will be large fluctuations.

If the actual data is better than the forecast, the currency usually appreciates. If the issuance is worse than expected, the currency will often depreciate.

For example, if analysts expect the unemployment rate in the United States to be 5% last month, and that figure is 4.8%, then better-than-expected numbers will usually boost the dollar.

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Strategies for Forex Trading the News

There are several different methods of trading news. First, some traders try to predict the outcome of financial news releases and trade based on the predictions before the news and data are released.

When forecasting economic data, some clues can be found in previous economic data. For example, when forecasting US employment data, you can use the employment part of the PMI report. If the employment portion of the three reports has increased from the previous month, this indicates that the number of new jobs created has also increased.

The second strategy for trading news is to wait for the data to be released and trade based on the market’s reaction to this situation. For example, if retail sales in the United States significantly exceed expectations, you can sell EUR/USD in anticipation of a stronger US dollar.

The third strategy is to ignore the fundamentals and only consider the previous price. In other words, traders do not predict trends. This common strategy is to use the breakout price of the previous price range as the entry point. This can be done short-term in day trading or every day.

For example, if the previous price fluctuation range of EUR/USD was a high of 1.2530 and a low of 1.2405, then a trader might place a buy stop order at 1.2530 and a sell stop order at 1.2405. It is expected that if the price breaks through 1.2530 upwards, the price will continue to rise, on the contrary, if it breaks below 1.2405, the price will continue to fall.

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Risks in Trading the News on Forex

Before major news releases, the purchase price usually expands. This increases the cost of entering and exiting the market.

Slippage is another challenge. Slippage occurs when you try to enter the market at a certain price, but due to the extreme volatility after the news release, you may actually place an order at a less than ideal price.

Volatility is also a major challenge. Even if your judgment on the direction of the market is correct, sometimes the volatility is so violent that you may liquidate your position.

Forex news trading provides exciting opportunities and the resulting frequency fluctuations. Taking the time to study the market’s reaction to various economic data will help you better predict future results and provide you with the market insights needed for successful trading.

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