Let’s take a look at some of the different buy limit and systems that you can use in the Forex market. You know the type. You’ve just read about it in one of the Forex forums out there. When the 27SMA crosses the 51EMA and the PSAR is under the price action, then the stochastic crosses all while the moon is high in the sky and, by the way – this system is only suitable for trading in the morning.
It’s obvious that these kind of trading systems are never going to work, yet so many people feel the need to try them out. Well if that’s you, good luck. You’re going to need it.
Trading systems that rely on a load of indicators all over your charts are never going to work long term. They’ve been designed by someone who happens to notice that it’s working right now on a currency pair or two, on one particular timeframe. It’s also worthwhile pointing out that these trading systems and strategies that are designed and posted in trading forums are usually the work of unprofitable traders, who are still jumping from strategy to strategy.
My advice, avoid at all costs. You’ll save yourself loads of heartache and money.
Old school technical analysis
You could try the old school technical analysis that’s been around for as long as anyone can remember. There’s ascending triangles, consolidation breakouts plus head & shoulders patterns, flag patterns and all the other patterns from technical analysis 101. Well the good news is that this stuff works. It has done for generations, and is very likely to keep working well into the future.
The hard part is that a lot of newer traders simply find this style of trading boring, or not as exciting as an indicator driven system. They feel that the more complex the system, the more likely it is to be their holy grail.
There’s a very good reason why old school technical analysis is still around, it’s because it works, and plenty of experienced profitable traders use it in their own trading.
One of the major downsides to using old school technical analysis as a trading system is that as a trading approach, it tends to be lower success rate, which a lot of people are unwilling or unable to deal with. Of course with this approach being a lower success rate, the winning trades are typically very large, which makes the system profitable.
Overall, old school technical analysis is something that you need to learn, as it complements a lot of other trading approaches, and really gives you a solid foundation in the Forex markets and beyond.
Some guru’s latest flash in the pan strategy
If you buy my latest and greatest trading system NOW, I’ll personally guarantee to you that you’ll never lose a trade again; you’ll only ever make money and turn your computer into an automated cash machine.
Unfortunately the market is awash with these so called ‘guru’s’ that have never even traded in their lives, yet will more than happily sell you their latest unbeatable trading system.
This is an obvious one, it’s not going to make you any money, but it will make money for the guy that’s selling it. There are some good educators out there, but they are few and far between.
Before you choose which trading Education Company you use, make sure they have proof of trading results of their trading systems, and experienced traders who have spent time and money in the markets.
Harmonic trading patterns
Harmonic trading is the art of recognizing particular price patterns in line with Fibonacci extensions and retracements to calculate turning points in the financial markets. Blow your mind yet? Harmonic trading is far from being the easiest way to trade the Forex markets, yet it could be one of the best trading systems out there due to the high reward:risk ratio’s and the fact it can be traded on any market on any timeframe.
Harmonic trading patterns probably shouldn’t be your primary focus if you’re new to trading, as learning how to trade these patterns does take time and a lot of learning. For traders who are already in the market and looking for something else to add to their toolkit, harmonic trading is worth a look.
Price action trading strategies
So here we have it, I confess, my favourite, and in my opinion one of the best trading systems you can learn. Price action trading is the reading of the raw price action on a chart. The price is the most up to date information on the chart, so traders should really focus most of their attention and learning on the price action.
There are lots of different price action patterns such as pin bars, inside bars, engulfing bars, inside bar fakey, not to mention all of the candlestick patterns such as hammers, shooting stars and so on. There may seem to be a lot, but quite a few are actually very similar, and do the same things. A Forex trader armed with these price action trading strategies in their arsenal has the ability to trade any market on any timeframe, as price action setups are effective in all market conditions.
Price action trading can also be used alongside other types of trading strategies such as harmonic trading, standard technical analysis and almost all other trading systems. Price action trading is one of the best trading systems because it can improve the effectiveness of all other strategies, by improving entry criteria, and reducing stop losses.