Commonly Used Trading Strategies in the Forex Market
Bladerunner Trading Strategy
This dramatically named strategy uses a 20-period Exponential Moving Average (EMA) or the middle Bollinger Band. It is particularly popular among short-term traders.
What is the Bladerunner Trading Strategy?
The EMA or Bollinger Band midline effectively "cuts" the price in half; trading signals are generated when the price moves cleanly above or below these lines and retests them multiple times, confirming that the long-term trend is unlikely to reverse, though short-term consolidation may occur.
Intraday Fibonacci Pivot Trading
Intraday Fibonacci Pivot trading combines daily pivot points with Fibonacci retracement levels into a single strategy, aiming to indicate where traders might find strong support and resistance zones.
What is the Intraday Fibonacci Pivot Trading Strategy?
When trading in an uptrend, wait for Fibonacci retracement levels and pivot support lines to converge. The Fibonacci indicator is the primary driver of your decision, with pivot confirmations acting as supporting factors.
Bolly Band Bounce Trade
This commonly used strategy is based on the principle that prices tend to revert to their mean. Traders use Bollinger Bands as a technical indicator to assess when to buy and sell. This strategy works best in relatively stable, range-bound markets.
What is the Bolly Band Bounce Trading Strategy?
The core assumption is that the asset will respect rather than break through support and resistance levels. Bollinger Bands mark these points with two lines, "squeezing" the asset. When the price hits resistance, it bounces down from the upper band toward the middle line; when it reaches support, it bounces upward. The simplest approach is to sell when the price touches the upper band and buy when it hits the lower band. However, note that prices often hover near the bands rather than bouncing cleanly.
Forex Overlapping Fibonacci Trade
This is a more advanced method of using Fibonacci levels in trading. Traders who favor this strategy often claim it is the only method they use to trade the market. It can be combined with other indicators for stronger signals.
What is the Overlapping Fibonacci Trading Strategy?
The main idea is to plot Fibonacci sequences from different points within the same trend and look for convergence. It works best in strong trends. For example, in an uptrend, plot Fibonacci from the trend’s low to its peak. Then, plot a second sequence from the second swing low to the same peak. If the levels align, they indicate a strong support (or resistance in a downtrend) zone.
Shape: London Hammer Trade
This strategy aims to capitalize on the volatility often seen at the London market open. It is especially popular for gold trading.
What is the London Hammer Trading Strategy?
A "hammer" is a candlestick pattern where an asset’s price falls from its opening level but then rebounds to close near or above the open, forming a hammer shape (a small body with a long lower wick). The assumption is that the London open provides the earliest signal for the day’s market direction. To use this strategy effectively, traders must have a clear understanding of resistance and support levels. For example, if the wick breaches resistance, it often signals a good selling opportunity.
Fractal Up Fractal Up: Trading with Forex Fractals
Fractals are used to confirm the existence or emergence of a trend. In choppy markets, they help identify a clear price direction. At their core, fractals confirm reversal patterns.
What is the Forex Fractal Trading Strategy?
A bullish reversal fractal consists of a low point in the middle with two higher points on either side. A bearish reversal fractal has a high in the middle with two lower points on either side. The "Alligator Indicator" is often used alongside fractals—a tool using moving averages to form three lines, helping confirm a reversal.
Forex Dual Stochastic Trade
The Dual Stochastic strategy uses stochastic oscillators to indicate potential trend reversals, giving traders early signals to adjust their positions.
What is the Forex Dual Stochastic Trading Strategy?
This strategy compares fast and slow stochastic oscillators to gauge trend momentum. When prices reach extreme stochastic levels (above 80 or below 20), it suggests a potential reversal as the asset becomes overbought or oversold. Traders typically wait for a strong trend and watch for stochastics reaching opposite extremes. It is best used with other technical indicators to pinpoint high-probability entry points.
Pop N Stop Trade
The Pop ‘n’ Stop strategy helps traders capitalize on sudden breakouts from tight ranges. Missing this move means completely missing the opportunity, as late entries often lead to unsuccessful chasing of the trend.
What is the Pop ‘n’ Stop Trading Strategy?
Pop ‘n’ Stop refers to a price breaking out of its previous range, pausing briefly, and then continuing upward. At this point, it’s crucial to watch for signals indicating the next price move. It combines price action theory with other indicators, primarily pullback candlestick patterns. Traders often place limit orders a few pips before the pullback candle forms to manage risk.
What is the Drop ‘n’ Stop Trading Strategy?
Similar to Pop ‘n’ Stop, Drop ‘n’ Stop occurs when an asset falls out of its recent range, fluctuates briefly, and then moves decisively in one direction. This movement presents opportunities if traders enter and exit at the right time.
