Many new forex traders think the core of a forex trading strategy should be predicting where forex prices will go. Try it and you will lose, you will win if you trade in a different way so why is prediction not the way to make money? Let’s find out. If you are predicting you are in effect hoping or guessing which is not a way to make money in any venture let alone forex trading. You cannot predict the future and if you try, your predictions will be as accurate as your horoscope.

There is however a big market in people who say they can predict and many theories that say you can such as Elliot wave, Fibonacci and Gann. They argue that as human nature is constant so the markets must be as well. However if you think about it this logic is obviously not true, because if markets were predictable with science, we would all know the answer in advance and there would be no market.

Markets move based upon uncertainty and while human nature is constant, it is not predictable with science – trading is a game of odds not certainties. If you want to win you trade the reality of price change and don’t try and guess in advance.

For example if you see a market testing a level of resistance you do not simply enter a trading signal – if you do you are trading against the trend and you could be wrong. Instead you wait for prices to test resistance and wait for prices to turn back the other way. Sure you miss the turn – but you couldn’t predict that anyway, so there is no point trying!

How do you know when to trade.

The secret of correct market timing is using momentum oscillators. There are many you can use and three of the best are: RSI, ADX and the stochastic indicator. We don’t have time to go through exactly how they work here simply look at our other articles and make them part of your essential forex education.

The key advantage they give you with your forex trading strategy is they allow you to gauge shifts in price momentum. You can use these shifts, to allow you to trade the reality of a price change to achieve better market timing and more forex profits.

The forex traders who rely on prediction lose and are generally naïve or greedy traders who think forex trading is simply a walk in the park – its not and neither would you expect it to be. The real pro forex traders don’t rely on hope or guessing or attempting to buy market tops or bottoms they look at and trade the reality of price change.

The way to succeed in forex is simply to look at support or resistance and time your entry on shifts in momentum and you should not just do this with a view to these levels holding.
You also need to buy or sell breakouts of new market highs or lows. It’s a fact that most markets develop their best trends from these highs and lows and you need to learn to go with them and enter the market.

It may look like your getting in at good levels and its tempting to wait for the pullback – but these moves tend to not pull back and accelerate and offer the biggest profit potential. The market price is the right place and if you cut out prediction and trade the reality, you can have the basis of a forex trading strategy that can make big consistent profits.

By: Monica Hendrix

Here we are going to look at a forex trading strategy anyone can learn in a few times and can apply for big profits. It’s simple and logical and you can learn it in a few days and then be making profits with it – Lets take a look at it.

The first point I am going to make before I cover this forex trading strategy is simple and simple forex trading strategies are better than complicated ones, as they are more robust with fewer elements to break.

This is a simple forex trading system that trades valid breakouts.

What is a breakout?

Quite simply it’s a level of support or resistance that is broken and the price makes a new low or high. If you look at any chart you will see that most of the big trends start from breakouts.

Valid Breakouts

You don’t want to just trade any breakout you want to trade ones that are considered valid i.e they have been tested a few times and have held. The more tests that have occurred the better (you want a minimum of 3) and these should be in at least two time periods a few weeks apart.

Understand This:

Most traders hate buying breakouts because they think their not getting in at a good price. They want the price to come back so they can buy the pullback – but valid breakouts don’t pull back, they accelerate away from the breakout point and the trader who waits never gets in.

If you grit your teeth and buy a breakout, you may appear to miss a bit of the move but that’s ok, as there is normally plenty more to come.

Confirming the Move.

Not every breakout accelerates away and many quickly turn back so you need to be careful to confirm each and every move. What you need to do is, see if momentum is picking up as the breakout occurs i.e. you are looking for momentum to support the break. This is easy to do.

All you need to do is look and use some momentum oscillators and two of the best are the stochastic and Relative Strength Index (RSI).

We don’t have time to discuss them fully here, simply check our other articles. These are visual indicators all you need to do is look at the set ups and if they confirm momentum is on your side then you can execute your trading signal.

Your stop?

Very simple – you place it behind the breakout point.

Breakout trading is simple to understand and is based on timeless logic and works.

A Breakout System That’s Made Millions

If you want a totally mechanical way of trading here is an even simple breakout system. It’s called the 4 Week Rule and it was devised by trading legend Richard Douchian. The system was originally devised for commodity markets it works great in currencies to here it is:

Close short positions and take a long position when price exceeds the highs of the previous 4 weeks THEN Close long positions and go short position when a price falls below the lows of the previous 4 weeks.

This system is so simple – but has been used by trading legends such as Richard Dennis and countless others. It piles up money in trending markets if markets are choppy you can use this filter:

Enter on the 4 week rule – but exit the position on a shorter time frame and go flat. 1 or 2 week cycles can be used; you would then simply re enter on the next 4 week signal.

Use Breakouts for Forex Success

So there you have the basis of a simple forex trading strategy that’s proven to work. You can devise your own based on the above points or if you want a mechanical system the 4 week rule is simplicity itself and it works.

Either of the above forex trading systems can lead you to currency trading success, so try them and see for yourself.

By: Kelly Price