What is a profitable Forex Trading strategy?
That’s what I was saying to myself over a decade ago, what the hell is a ‘Forex trading strategy’?!
Let me explain to you what a Forex trading strategy is so you don’t have to waste lots of time finding out.
A Forex trading strategy which is said to be successfully proven and profitable is only determined by successful back testing.
Just as important is trading the Forex trading strategy successfully on a live account over at least a 12-month period.
After this period of time if applied correctly the Forex trading strategy will show similar results to the back-tested results.
(Don’t worry we are going to break down what a Forex trading strategy actually is in this article)
For example; The Able Method is our core trading approach, methodology and strategy all wrapped into one.
You can access that here if you want to become a member.
The Able Method has been successfully back-tested and tested live for great success.
Not only by myself but also by evolution members.
You can watch the proof of returns video here where we show you the success of this strategy by logging in a live and showing you.
The reason most newer traders do not succeed when trading Forex is because they are misled and do not really understand the concept of trading or what a Forex trading strategy is.
We were in that position once.
So, let us explain.
Our Forex Trading Strategy definition.
A set of conditions and/or criteria that have been met in the underlying market to edge the probabilities on your side that price forecast is going to continue in the intended direction of analysis.
Examples of the conditions/criteria we speak of are;
- Price position relative to other price points.
- The Price relative to other time frames and subsequent price points.
- Price relative to indicators
- All of the above together to form an objective decision of whether the asset/Forex pair go onto a watch list.
- The unwavering discipline to apply the above objectively.
We will now go through the summarised points of a Forex trading strategy under the mantra of Able Trading.
It’s important that you understand and follow our mantra
Observe |Confirm | Act
Price position relative to other price points.
We will for this example be referring to a 4-hour time frame.
That is our preferred time frame to enter trades on with the Able Method.
This observation is to identify where price is and what is the supply and demand of the currency pair telling us.
i.e. are the buyers (demand) or sellers (supply) in charge.
Also known as Bulls or Bears. (Bullish or Bearish)
To be Bullish you think price will rise to be Bearish you think price will fall.
The questions we ask ourselves are the following;
Is the price trending or ranging?
Where is the price relative to previous; highs & lows, support and resistance, round numbers and 52-week highs and lows.
What was the previous period (candle) price close telling us?
Was it a close of importance or did it break a structure of significance? (watch video on this topic here)
Once we have gone through the process, we then look at multi time frame analysis. (watch video on topic here)
That is to look at the same conditions mentioned above but on the daily, weekly and also the monthly time frames.
Price relative to other time frames and subsequent price points
You then compare the conditions on each time frame to your current sentiment on the individual time frames.
If the 4 hour price is floating in a range (between to price points over a given time horizon) but the daily, weekly and monthly are about to hit a resistance/support level of prior highs then we could be looking at a probability of price falling/rising sometime in the future.
Since we are still observing there is no need to do anything more than further analysis to add the probability in our favour and increase confidence.
Price relative to Indicators.
Now we continue to observe where price is relative to indicators. (Watch video on topic here)
We ask ourselves;
Is the price above or below 200 sma(simple moving averages)
What about the 50 sma above or below?
Is the 50 sma above or below the 200 sma?
What about price is it above stacked sma’s I.e. sma’s all stacked on top of one another with price above = bullish
Is price below stacked sma’s I.e. sma’s all stacked below one another with price below = bearish
How about the price trading outside of the Bollinger bands and closing, suggesting strength in the price move?
Or is price trading back inside the bands after piercing it, possible reversal? (Watch video on topic here)
Moving onto to the oscillators such as the RSI and MACD.
Is the RSI Overbought/sold is the MACD showing momentum in the price move?
Are the signal lines positive or negative? Is the histogram positive or negative.
You then do this on all time frames and arrive at a decision based on your analysis.
In the example above, these questions lead to a probabilistic decision on your market view.
Yet, we are still only observing price in this example of a Forex Trading Strategy.
It may sound like a lot and maybe it sounds a bit confusing.
But, when you start to put this plan in place you form a solid routine and it becomes second nature.
After undertaking the analysis above we confirm certain criteria.
One of the most important aspects of confirmation before entering a trade is the risk/reward ratio
We like to see a reward at least twice as much as we risk.
Even if all the analysis lines up and the risk/reward condition has not been met this will void the trade.
Further Examples of criteria that needs to be met are as follows;
Important Price closing above/below support and resistance and previous price points. (watch video on this topic here)
This confirms the probability of price increasing and continuing in the direction of the price close.
A spike and a close below the level is not a confirmation.
Note we say that probability has increased and that it is not for certain.
Further confirmations are aligning the MACD/RSI price and indicators together with multi time frame confluence.
Example could be as follows;
Price breaks and closes on 4 hourly/Daily above multi month price range.
RSI not over bought conditions
MACD signal lines crossing, histogram positive on daily, weekly and monthly
Price is not meeting resistance on daily, weekly and monthly.
Prior highs months back giving potential price target
Momentum further secured by close positive outside of Bollinger band.
We now put all of the above together.
You now put all of the above analysis together.
This forming a methodical and objective approach.
Once arrived it is time to act and get into the trade.
There is secret final conditions and criteria that must be met that we cannot write here as that would be unfair to our paying members. You can become a member here
This article covers a summarised version of the Able Method Forex Trading Strategy.
The main issue we see in newer traders when they try to apply a Forex Trading strategy such as the Able method is, they may not follow the rules.
This is not intentional it is just very difficult to maintain discipline and reaffirms why such a solid trading strategy is required.
It also highlights why so many fail at trading.
Too much discretion and subjectivity will destroy your account, eventually.
We get it, we are all human and we all make mistakes, even we do over a decade later but in trading these mistakes can cost you money so it is essential we have a solid Forex trading strategy such as the Able Method.
We are not the only ones to make a success of it. Members are too. Such as Tim Davies. He is now 7 months consistently profitable after learning and applying the Able Method.
He had 2 years of struggling with other educators before he learnt with Able Trading it is a true trading success story. Read all about it here
Discipline plays a huge part in trading success, something I’m working on with my members constantly.
The discipline to apply the Forex trading strategy properly and more importantly is to await the correct conditions to develop before entering into a trade.
What is the point of a Forex Trading strategy after all?
It is fundamentally to remove the subjectivity from us as we tend to be emotive and act on our emotions.
As we are well aware; we struggle with discipline generally as humans.
Therefore, a solid Forex trading strategy and approach takes a lot of the decision making away from us.
This aids us hugely.
Now if you would like to become one of the Able and evolve your trading – join the evolution membership here.