Expert: Gina Boykin - 7/18/2007

Question
Hello:

Do you have any foreign exchange trading strategies that are useful and reliable?  I would like to know of some.  I've been trading with a demonstration account for awhile but have not been able to successfully find a strategy that works well.  

I thank you for any suggestions.

Answer
If you have not visited www.babypips.com, I would highly suggest it.  It's the best forex education site out there, and they have a section dedicated to creating your own trading style.

There are a lot of trading "strategies" or "systems" out there - ranging from free to thousands of dollars.  One thing I would suggest is to determine what type of trader you are, and that will help you narrow it down to something you feel comfortable with, and will be worth the time, effort, and money TO YOU.

There are 3 main types of traders:
1.  Active/Short-Term Trader or Day Trader
2.  Swing Trader (holds onto a trade overnight up to a few weeks)
3.  Position/Long-Term Trader (Warren Buffet is the best example of this, as he buys and holds....and holds)

Which one you are will determine the type of strategy or system that is best for you.  Whatever you chose, try it with your demo account until you are comfortable enough to use real money.  Even then, start small.  As you make money, you will gain the confidence you need to invest in a larger account.

I personally am more of a swing or position trader.  My husband is more of an active trader.  This is why we use different systems.  Again - there is no "one size fits all" when it comes to money.

I am trading right now using a hedging system, which has been very profitable so far.  It's more of a buy and hold strategy.  The advantages of this strategy are that you get paid interest daily, and that it avoids using graphs/charts.  Currency pairs do move a lot throughout the day and overnight, so you have to be able to stomach the swings - up or down.  Check out www.4xrules.com or www.freedomrocks.com/71650 for more info.

My husband is using another program for a small account, that makes trades automatically (like a robot).  The trades are made to capture small pip movements (5-10 pips) so they are made within the day.  The trades can be made using small dollar amounts (lower risk) or large amounts (higher risk and potential for higher gains & losses), but do not bring interest because they are not held overnight.  You can check this one out at www.4xwins.com

If you have the time to sit at a computer and trade during the best trading periods (which are outlined on babypips), then you can create a strategy using a combination of chart patterns that you understand and like.  When we make short-term trades on our own (without our systems) we use the MACD, exponential moving averages (5 and 10), and stochastics as our indicators.

I am not sure what you have been using for your demo account to be able to help you specifically with your strategy.  Just know that no investment strategy is "perfect".  EVERY SUCCESSFUL INVESTOR has lost money at some point.  

So whatever you use, know that you will win some and lose some, but as long as your WINS happen more often, then you are trading just as well as most mutual fund managers :)

If you have any more specific questions as you progress, let me know and I will try my best to help.

Happy Investing!