Advanced Forex Strategies

Advanced Forex Strategies

Advanced Forex Strategies

Forex is a complex market, so arguably any strategy applied to the Forex market is inherently an advanced Forex strategy. However some strategies can be seen as more advanced than others in that they trade on volatile times. It could be argued that trading in relatively normal market conditions, for example using a moving average is not particularly advanced, however the trader will still find that the market behaves in ways which are hard to trade. Thus using a simple strategy does not mean that trading is any less hard.

There are reason that traders may wish to trade on more volatile markets. Volatile market tend to move. But at the same time they can oscillate in the opposite direction and do this rapidly. This makes trading volatile times very hard and indeed many may wish to avoid such times altogether. While the same tendency to move back and forth can be seen at (relatively) quieter times the trader can at least have time to consider how they can manage a trade. The downside of this is that the market can more slowly move against the traded position and not recover or not recover in time.

Thus an advanced strategy can be seen as one where the trader has to bake in trade management in some way, as they won't have time most likely (but not necessarily) to manage the trade. One approach is to let the market determine when to make a trade. Thus the trader can consider trading on changes in liquidity. Why is this a strategy. Changes in liquidity can have a significant effect on the market, altering moves. The way the change effects the market may not be what is expected however. Nonetheless like all trading the trader can look out for signs of what the outcome might be. An example is market closes, which happen, but in particular European market closes during the New York session. A trend tends to have a structured end, but with a fall off in liquidity it may rather collapse at least for a while, as an example. Sharp reversals can then themselves turn into continued directional albeit perhaps volatile moves.

The trader can take this further and trade on news events, which can be seen as an inherently advanced strategy. Trading a news event consists partly of choosing a time to enter, avoiding intense jagged volatility and then deciding when to exit. While a news trade can become a longer trade, the trader may typically tend to trade on very short time frames. One reason this is an advanced strategy though it may seem simple in some ways is because the trader needs to understand how the Forex market moves, as news events can be preceded and followed by fast moving markets with volatility.

One potentially advanced strategy the trader may wish to consider is to trade using an indicator such as the Ichimoku Cloud. This comprehensive and complex indicator covers a wide rage of market conditions and strategies but requires understanding how to use it. Like all strategies and indicators, the signals given can be wrong and because they worked in the past does not mean they will do so in the future.

Using robots to trade in also an advanced strategy. It may seem tempting to the beginner to let robots trade on their behalf, but arguably they should be used when they need to be used rather than as a replacement for applying strategies. For example, the trader may have utilised or developed a strategy which requires them to place trades relatively frequently and may find this tiring. A robot can be programmed to do this on behalf of the trader as it does not tire (ever). To run robots when disconnected from their computer, the trader may wish to consider renting a VPS with the broker which hosts strategies 24/7. Examples of robots are Expert Advisors (EAs) on MetaTrader, cBots on cTrader and scripts on JForex. Robots can rapidly produce losses the trader's account but can also trade in ways and at times the human trader may find difficult or impossible.

Robots can apply signals given by an indicator, like a human trader, but can also execute strategies such as higher frequency trading. High Frequency Trading is an advanced strategy but in some ways reflects the concept that an advanced Forex strategy is one which trades on market movement (an approach high frequency trading takes to something of a limit), rather than expressing a complex set of rules. In fact the most advanced strategies can have very simple rules, but trade on very rapid movement using advanced computational and communication hardware, in ways which the trader could not. The trader may wish to consider that having a complex set of rules to trade may be less efficient than trading with a simple set of rules. They can then consider what is the best way to execute these rules. Is it themselves, allowing them to potentially apply their discretion, or using a robots, or allying it with information such as social trading.