Forex Trading Strategies And How They Are Influenced By A Trading Platform
Many amateur Forex or CFD traders believe a Forex broker is going to be critical to their ultimate trading success. While this sentiment is not completely wrong, by far one of the most underrated requirements when it comes to profitable Forex trading, is selecting the best forex trading platform available combined with advanced forex trading strategies.
What Are The Best Platforms Available?
The very best forex trading platforms available in the market today give traders the freedom to execute any number of forex trading strategies and as the January 2016 table below highlights, different brokers offer different platforms. It is critical to select a broker that is right for your circumstances. If you’re an advanced trader execution speeds and high leverage will be quite important. However, if you’re a beginner a broker with guaranteed stop losses and an easy to use platform is key.
Indeed Forex brokers are important as they are the ones responsible for offering services such as high leverage to amplify returns and guaranteed stops to protect capital. However, the very best forex trading platforms allow users to devise all sorts of Forex trading strategies that enable currency trading success. We detail some of the more well-known forex trading strategies below.
The Bladerunner Forex Trading Strategy
This forex trading strategy is no doubt one of the simplest out there and can be put to use on every trading platform. The Bladerunner strategy simply looks at price action in currencies to determine the optimal entry point or purchase price. Traders do not need to use any indicators other than what is found on pricing charts, which makes this Forex trading strategy manageable, even for amateur traders.
This strategy gets its name because the Exponential Moving Average (EMA), a key on chart indicator used here, looks like a blade or knife edge dividing price on the charts.
The Fibonacci Retracement Forex Trading Strategy
This strategy is considered a predictive one. Fibonacci numbers are a sequence of numbers where the next digit is found by adding up the two preceding it. For example 0, 1, 1, 2, 3, 5, 8, 13 etc. Derived from Fibonacci numbers are a series of ratios that are of importance to traders, particularly 61.8% commonly referred to as the “Golden Ratio.” Traders often place Fibonacci lines over the price chart they are examining, extending the lines past the current market rate.
This allows them to determine potential retracement points and adjust their Forex trading strategies based on this model. Similar to the Bladerunner above, all that is required with this strategy is an effective set of graphs and price charts which comes with all reputable forex trading platforms nowadays.
The Bollinger Band Bounce Strategy
Bollinger bands are the simple measure of standard deviation or volatility of a stock price. When it comes to trading Forex most traders prefer significant, volatile price movement either up or down in order to develop a clear trend. However, sideways movement of a currency pair does not necessarily preclude the trading of that instrument. The Bollinger Band (Bolly Band) Bounce is one of the most popular forex trading strategies for when currencies are trading in an obvious trend. Bolly bands form a limit around short term price movement.
When price hits the upper Bollinger band limit it bounces off it until it reaches the lower Bolly band limit. Once it bounces off the lower limit it heads back in the opposite direction, similar to a rubber band or bouncing ball. Again, this strategy is possible on every platform.
The Dawn of Automated or Algorithmic Trading Strategies
The very best forex trading platforms of today not only allow users to analyse quotes and make trades, they also allow them to program software that helps develop and automate strategies. In 2003 MetaTrader was designed for the trading of foreign currencies, CFDs and Futures and included the Expert Advisor or automated trading robots program called MQL II. MQL II has evolved over the last 10-15 years with MQL5 IDE now available on the MetaTrader 5 platform. Not only does the newest version of MetaTrader allow for improved fundamental and technical based forex trading strategies, it also offers more power to developers creating trading robots.
MetaTrader 5’s Automated Strategy Tester
MetaTrader 5 has been branded the best Forex trading platform on the market today because of the MQL5 Strategy Tester. This built in powerful tool allows traders to examine the effectiveness of their automatic Forex trading strategies. It assesses the best inputs and likely outcomes of a trading event before this strategy is used in live Forex markets. Once automated or algorithmic Forex trading strategies pass the developers tests, they can be used over and over again to buy and sell currencies in accordance with its parameters.
Combining Forex Trading Strategies, Optimisations And Testing
Due to the volatility in Foreign Exchange markets and the thousands of macro environmental factors that can impact currency prices, traders adopting an automated strategy cannot do so without the Strategy Tester. Once upon a time algorithms were over optimised and incredibly time consuming to develop.
Nowadays the Strategy Tester available with MetaTrader 5 seamlessly combines the right amount of optimisation and confirmation of achieved results if the strategy was put into practice. If the Forex trading strategies designed by traders are equally successful in both tests or segments it is a sign that the automated strategy works and is truly profitable.
Ultimately, both manual and automated Forex trading strategies are reliant upon the trading environments made possible by a trading platform. Strategy testing is vital and some of the best Forex trading platforms allow traders to automatically optimise their algorithms.
It is incredibly important that traders test their forex trading strategies effectively before putting them into practice. All the best Forex trading platforms on offer in Australia provide access to a demo account. Use your demo account wisely to ensure your forex trading strategies are fail-proof before exposing yourself to the choppy waters that are currency markets. Also make sure your trader is Australian certified to avoid forex scams that appear from some unregulated currency traders.