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Posted on May 06, 2022 at 12:26 PM
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Forex Trading Strategies For You! (Series 2)

In the world of Forex trading, a working strategy is everything. This article features some of the Forex trend-trading strategies that have been tested and trusted by experienced Forex traders over the years.

In the first series of this article (posted last week), I raced you through some recommended trading strategies by renowned Forex trader and analyst, Adam Lemon, and I hope you enjoyed it.

I launched the article by beaming the spotlight on the 4 'Golden Pairs' employed in this strategy, after providing a due justification of why they made the cut.

I then proceeded to present the Money Management principle deployed in Adam Lemon's strategy - The Fractional Money Management principle - with a clear insight into its awesome benefits as compared to conventional money management. 

I finally rounded off with some trade entry rules, while presenting a short trade entry on the GBPUSD pair as a case study and highlighting the two important factors in the selection of a trade entry—Market Volatility and Trading Times.

Click Here to Read the Full Article

As earlier mentioned, two factors—Market Volatility and Time of the Day—must be duly considered in the selection of best entries.

VOLATILITY: Since the size of candlesticks is largely dependent on the volatility of the Forex market, it follows, therefore, that better entries will form with larger candles.

TRADING TIMES: The Forex market is observed to be most liquid during the London and New York business hours, and so also is the Japanese Yen.

Therefore, in the selection of a profitable trade entry, it is important that trades be placed only between 8 am (London time) and 5 pm (New York time), except with the USD/JPY pair where entries may also be made between midnight and 4 am (London time). 

TRADE EXIT STRATEGIES

With Adam Lemon's trend-trading strategy, quite a number of exit strategies exist and we'll be touching on two of them:

Volatility-Based Targets: This is one of the easiest exit strategies that is based on the Average True Range (ATR), which can be used to fix profit targets.

The ATR indicator can be found within almost all trading platforms/charting software and is mostly set on the H4 chart of the currency pair being traded, using 30 periods.

To obtain a profit target, the average range in pips (obtained from the ATR) should be doubled and added to the entry price.

By so doing, the trade will either be stopped out for a loss or hit the specified take profit which will be twice as large as any incurred loss.

Risk-Based Targets: Alternatively, the profit target can be based upon the number of pips risked, and can be simply doubled. For example, if the risk on a trade is 50 pips from the entry price to the stop loss, a take profit level of 100 pips (50 X 2) should be set from the entry price.

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Note that in using Lemon's strategy, it is important to test with a demo account first, and transit to a live account afterwards. Even then, you should only go live when you're comfortable and familiar with the risks involved.

That being said: let's go give our shiny new strategy a spin, shall we?


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