Free Forex Strategies and Systems

In this section I have tried to put together a group of FX Trading Strategies for you to try. Most of these free forex trading systems can be used on any size of trading account including micro, mini and standard.

Proven Forex Trading Strategies

They have been tried either by myself or by my trading friends and they have shown to be winning forex strategies. However, as with any forex trading strategy, excellent risk management must be used at all times.

Choosing a Forex strategy

When choosing a currency trading strategy , it is important to select one that best suits your needs. It would be no use using a strategy that required you to watch the market during the whole of the London session if you had a day job. The strategies below are all easy forex strategies to follow. You can of course modify them if you feel you can improve on them.

Forex Scalping System

This is an easy little strategy to follow. It involves pinpointing major support and resistance point. You can use fibonacci retracements for these. Then when price hits a major support point, go long. Whenever it hits a major resistance point, go short. Tight stops must be used as well as small take profits. This allows the trader to capitalize on the “bounce”. There is usually at least a small bounce at major support and resistance points. It would be a good a idea to use a broker with a small spread for this strategy so the spreads don’t eat into your profits too much. This is a good forex strategy with a lot of potential, but be sure to try it on a demo account first.

Forex Hedging Strategy

A popular FX hedging strategy is to buy GBP/JPY and to simultaneously sell CHF/JPY. The goal is to profit from the interest rate differentials as well as the price movements. Currently a long GBP/JPY earns considerable swap interest due to the large difference between rates. You have to pay interest on the short CHF/JPY, but it’s considerably less than on the long GBP/JPY position. Typically a good ratio to use is 1.8 lots for the short CHF/JPY to every 1 lot of GBP/JPY. However, different amounts can be used.

It’s a good idea to leave enough margin in your account to weather at least a 1,000 pip swing against you.

This strategy does involve considerable risk because the currency pair CHF/JPY is not guaranteed to go in the opposite direction to GBP/JPY. However, it could be a lower risk method of taking part in the popular carry trade. This is potentially a very effective forex trading strategy.

Forex Arbitrage System

A clear arbitrage exists between mainstream currency trading brokers and spread betting forex brokers. The arbitrage situation exists because with spread betting you have the option to have your pips priced in different currencies. For example you could have a long gbp/usd position so that the pips are priced at £5 per point. To hedge we could use a short GBP/USD position with a normal forex broker, using 1 standard lot.

We will assume the starting price is $2.
If price moved up to $2.20. The short position would be $-20,000. The long would be £10,000. The net profit would be the £10,000 - $20,000 (£9090). A net profit of £910.

If price moved down to $1.80. The short position would be $20,000. The short would be £10,000. So profit would be $20,000 (£11,111) - £10,000, which would be a profit of £1,111.

So no matter which way price moves, the arbitrage situation works. The reason it works is because of the conversion from dollars back to sterling is at different rates to due to price movement. In theory this is a risk free forex trading system. This may seem like an advanced forex trading system, but once you master the understanding of it, it’s really quite easy. Out of all the online forex trading systems, this could actually be the lowest risk!

5/8 Moving Average Strategy

This is a nice simple forex trading strategy. It involves waiting for the 5 EMA to crossover the 8 EMA. A chart below demonstrates this occurrence.

The stop loss and take profit points are discretionary, but should be at major support and resistance points. Personally, I use fibonacci retracement points and trend lines. Pivot points can also be used. It’s important to always ensure your risk/reward ratio exceeds 1:1.

Profitable Forex Trading strategy

As mentioned above, risk management is very important with any currency trading system. Another thing that is also very important is the ability to stuck to the strategy 100%. It is easy especially at first to feel like you must “be in the market” or feel like you are missing out. It is important that this kind of impulsive behavior is avoided at all costs. If you are not confident you can avoid, it would probably be best to practice on a demo account for the time being until you feel you have masted it.

Currency Trading Strategies

In conclusion, there are so many potential currency trading strategies out there to use choose from. All you can do is choose one that most appeals to you. I would avoid paying money for a “Perfect Currency Trading System” or such like as the chances are it till be a scam. You would be better putting that money into funding your trading account.