10 Best Forex Strategies to Use in 2024

Looking for the best forex strategies? 

Currency prices move on a second-by-second basis, so predicting the future direction of a forex pair without having a strategy in place is unlikely to result in long-term success. 

Therefore, this guide will review and rank multiple strategies for forex trading that are suitable for traders of all skill sets. 

Best Forex Strategies Reviewed

Below, traders can find a full explanation of the aforementioned top forex strategies.

As we touched on, many traders will utilize more than one strategy at a time.

Later, this guide also covers how to choose forex strategies that work for specific trading goals. 

1. Fibonacci Flush – Identify Potential Entry and Exit Orders

Forex traders can utilize the Fibonacci Flush approach to locate hidden levels of support and resistance for entry, exit, and stop placement. This indicator is frequently used by traders who want to buy or sell during a strong trend.

By examining the support and pullback levels, traders can identify the current trend with an element of certainty. Some traders use the Fibonacci Flush strategy to trade the most volatile forex pairs on the market.

Scalpers and long-term investors, as well as swing and pullback traders, can also try to profit from this technique. This is due to the fact that the Fibonacci strategy can be heavily adapted to benefit from short-term momentum as well as longer plays.

Ratios become more apparent when looking at two or more time periods. While market timers might make gains when they combine daily and weekly charts, swing traders could find more value by opting for daily and 60-minute charts.

In both situations, the alignment of important Fibonacci levels over several time frames reveals hidden support and resistance. As such, some traders consider this to be the best forex strategy for consistent profits. A stop order will be placed just past the identified Fibonacci level.

2. MACD – Pinpoint New and Ending Trends

The MACD is an indicator that follows trends. This falls into the category of a momentum indicator. A signal line consisting of a 9-day exponential moving average is added to the chart of the forex pair to validate momentum changes.

A buy order is usually seen when the MACD line goes above the signal line. Conversely, when the MACD line goes below the signal line, it may suggest that selling pressure is present. Some of the moving averages that intraday traders often use are 12, 26, and 9.

In contrast, some of the commonly used moving averages for swing traders are thought to be 5, 13, and 1. Meanwhile, scalpers might opt for hourly or 4-hour charts. Of course, the period chosen is up to the individual and respective strategy.

Nonetheless, many traders utilize this strategy alongside the exponential moving average (EMA) to identify entry points. Put simply, traders use an EMA, along with the MACD, to determine market volatility and identify uptrends and downtrends. This is one of the best forex trading strategies for identifying bullish and bearish momentum.

3. Bollinger Bands – Points of Support and Resistance

Bollinger Bands could be the most effective forex trading strategy for support and resistance. The bands begin to constrict when the Bollinger squeeze occurs, which often signals that a breakout is about to occur.

On a graph, the move will often continue to rise as the candles begin to break out above the upper band. Then the price tends to continue to decline if candles begin to break out below the bottom band.

The Bollinger Bands’ channel width measures price volatility. In other words, the Bollinger Bands’ breadth increases as a forex pair’s price experiences a string of large movements.

In contrast, the channel gets narrower when there are tiny price changes – as seen at 20:30 on the above chart. Momentum is extremely strong when the price is consistently testing one of the upper or lower bands, or breaks through one of them.

4. Moving Average Crossovers – Discover Potential Changes in Direction

Moving average crossovers is the best forex trading strategy for spotting potential changes in directions. This can assist traders in spotting patterns, such as the probable trend movements, prospective entry points, and the possibility of a reversal.

A moving average crossover occurs when the shorter-term or fast-moving average crosses above or below the longer-term or slow-moving average at a certain point on a chart.

The majority of such forex strategies revolve around timing their entrances and exits while trading moving average crossings.

This straightforward approach gave names to crossovers like ‘Death Cross’. In this one, the shorter-term moving average crosses below a longer-term trend. Another example is the ‘Golden Cross’, which occurs when a shorter-term moving average crosses above a trend that is identified as longer-term.

One of the common forex strategies for beginners is to enter a trade with a clearly defined risk-reward ratio. For instance, traders can position a stop-loss order above or below the crossing level when they identify a forex pair that has a history of trending.

5. Bladerunner – Shows Disparity Between Indicator and Current Market Price

The Bladerunner approach uses pivot points, support/resistance levels, and candlesticks, in addition to basic price movement. A large part of finding forex strategies that work is researching when and how to utilize the indicators and charts required.

Traders should make sure the market is trending before implementing the Bladerunner technique. The Bollinger Band indicator’s middle line and a 20-period EMA can both be used in this forex trading strategy.

In the image below, we have elected to view the 5-minute chart of EUR/USD using the EMA.

When a price is above the EMA, it is assumed that it will decline shortly. In contrast, when it is below the EMA, it is assumed that it will rise soon. The first candlestick to touch the EMA is commonly referred to as the ‘signal candle’.

The second to move away from the EMA is the ‘confirmatory candle’. In order to benefit from the rising price, forex traders might place their orders at this level.

6. Momentum Indicator – Recognise Overbought or Oversold Pairs

The velocity behind price fluctuations is measured by the momentum indicators. This price indicator’s algorithm compares a closing price from any time frame in the past to the most recent.

As such, this is one of the best forex strategies to identify potentially overbought and oversold currencies.

Since the resultant curve oscillates between the centerline and 100, a momentum indicator is categorized as an oscillator. The distance between the indicator line and 100 indicates how rapidly the price is changing.

When the curve hits its maximum or minimum value, overbought and oversold circumstances are probably about to occur.

7. Parabolic SAR – Identify Potential Short-Term Reversal Points

Traders frequently utilize the parabolic SAR (Stop and Reverse). This is the best forex strategy to forecast the short-term momentum of currencies. Depending on the momentum of the asset, the parabolic SAR indication is represented visually on the chart of the asset as a series of dots positioned either above or below the price (as seen below).

When the trend of the forex pair is upward, a little dot is placed below the price, and when the trend is downward, one is placed above it.

A move beyond this indicates a reversal, prompting the trader to expect a move in the opposite direction. A commonly used forex strategy is to set a trailing stop-loss order at the SAR value.

As we touched on, the best forex trading strategies use multiple indicators concurrently. For instance, the parabolic SAR works well with the moving average, ADX, and/or the stochastic oscillator.

8. Relative Strength Index – Market Momentum Indicator

The relative strength index (RSI) evaluates the speed and amplitude of recent price fluctuations. As such this is one of the easiest forex strategies to assess market momentum. An oscillator (a line graph) representing the RSI is shown on the chart (as seen below), with a scale from 0 to 100.

Beyond identifying overbought and oversold assets, the RSI has other capabilities. It can serve as a buying and selling cue. The RSI may also signal currencies that are poised for a price correction or trend reversal.

An overbought scenario is generally indicated by an RSI reading of 70 or higher. An oversold state is indicated by a value of 30 or lower. It can be beneficial to use EMAs that react to recent price changes more quickly.

Some of the best indicators to use in conjunction with the RSI are those that are very short-term focused, such as the 5-day EMA crossing over the 10-day EMA.

9. The Pivot Point – Showcases Supply and Demand Levels

This forex trading strategy illustrates the levels of a currency pair’s supply-demand balance. When the price reaches the pivot point, supply and demand for that particular pair are equal.  Price movements that cross the pivot point level indicate a greater demand for a certain currency pair.

On the other hand, price movements that fall below the pivot point level indicate greater supply for that particular currency pair. As such, pivot points could also be described as a way to identify zones of support and resistance.

If used correctly, this could be the best forex strategy for consistent profits. For instance, day traders can use daily data to determine pivot points. Swing traders could opt to use weekly data to determine pivot points too.

A position trader purchases and keeps an investment for a prolonged period of time in the hope that its value will increase. In this case, traders can use data at the start of each month instead.

Among other factors, pivot points can be utilized in conjunction with the RSI oscillator.

10. Stochastic Oscillator –  Recognizes Potential Trend Reversals

A few momentum indicators are employed by analysts and traders to foresee future reversals, one of which is the stochastic oscillator. As such, this is among the best forex strategies for recognizing trend reversals.

The stochastic oscillator measures range as opposed to price or volume. This is achieved by comparing the most recent closing price to the range for a particular period.

Although it can be changed to suit specific analytical requirements, a commonly used time frame is 14 days.

The stochastic oscillator is range-bound, which means it is constantly in the range of 0 and 100. It is therefore a helpful sign of overbought and oversold conditions.

Calculating the stochastic oscillator involves deducting the low for the period from the current closing price. This is then divided by the entire range for the period, and multiplied by 100.

The two lines on a stochastic oscillator chart typically represent its 3-day simple moving average and its actual value for each session. The junction of these two lines is regarded as a hint that a reversal may be imminent.

Choosing a Forex Strategy When Trading Currency Pairs

Choosing a forex strategy when day trading currencies is no simple task as there are so many to master.

Here are some pointers for choosing the best trading strategies for small accounts, as well as larger balances:

• A trader needs to consider their financial objectives in order to develop an effective forex strategy.
• Understanding their risk tolerance is a good place to start.
• Beginners or traders with a low tolerance for risk will likely prefer open small positions and choose a strategy that indicates where to place a stop-loss order.
• For instance, moving average crossovers and parabolic SAR.
• Also bear in mind that as experience grows, risk tolerance is likely to increase. As a result some traders prefer to opt for managed forex accounts.
• As a result, it’s critical to periodically reevaluate risk tolerance to establish the most effective forex trading strategy.
• Those looking for a trend trading strategy could opt for MACD, stochastic oscillator, and RSI.

When asking ‘what is the best strategy for forex trading?’, deciding whether to trade currencies as a short or long-term trader is equally crucial.

As we’ve discussed, scalpers, for instance, will use different methods and timeframes to swing traders.

Conclusion

This guide has talked about the best forex strategies and reviewed a selection of low-spread brokers with plenty of tools. Some of the best tools used in forex strategies include those that highlight trends, momentum, volatility, and potential reversals.

FAQs