7 Best Forex Trading Strategy According to Grace Cheng
Starting from trend riding to news straddling, here’s a collection of best forex trading strategies that become a mainstay of Grace Cheng.
Many traders look for the most perfect forex trading strategies that can be applied all the time and relevant in all market conditions. In fact, the key to success to find the best forex trading strategy is on understanding and application in the right market conditions.
With these principles, Grace Cheng found 7 best forex trading strategies of his own version. But before peeling one by one strategy in question, let us get to know the figure Grace Cheng first.
Who is Grace Cheng?
Before transforming into a successful forex trader, Grace Cheng is a graduate of the National University of Singapore in the field of Biology. Based on a strong desire to be financially independent, he also devoured various investment books, until finally decided to deepen forex trading.
Grace Cheng spent a lot of time on demo accounts before finally establishing himself to be a full-time trader. He likes to trade in major pairs such as EUR / USD and USD / CHF, as well as using day trading strategy.
Grace Cheng then create a blog and publish his trading diary there. Unexpectedly, his courage is sweet fruit because the success of trading poured on his blog managed to attract many visitors from various countries, including Britain and the United States. In addition, Grace Cheng contributed in various popular media such as Technical Analysis of Stocks & Commodities, The Trader’s Journal, The Forex Journal, Investopedia, and Smart Investor.
Grace Cheng was contacted by one British publishing company, Harriman House, who offered him a partnership to set up a forex trading book. From there, was born the work of Grace Cheng who became the inspiration of this article, the book titled 7 Winning Strategies for Trading Forex.
So, what are the 7 forex trading strategies discussed in his book?
1. Following Market Sentiment
This technique is actually just one part of the overall trading strategy that usually involves the rules of entry and exit. However, following market sentiment can be the most important foundation in trading decisions.
Grace Cheng uses fundamental science to know market sentiments, which he says can be recognized in 3 types: bullish, bearish, and indeterminate. Understanding of economic indicators is highlighted as a science that traders need to learn to master this strategy.
Not enough just to know the market sentiment, Grace Cheng also recommends traders to measure its strength. The method he chose to identify the strength of sentiment is by listening to the Commitment of Traders (COT) data release, and the analysis of price movements after an important fundamental data is published.
2. Trend Riding
Trend riding, or often known as trend following is one of Grace Cheng’s mainstay strategies. This Singapore female trader admits that he never made a fuss about how to anticipate changes in the direction of the trend in order to catch the opportunity as early as possible. Based on his experience so far, following the trend that has been formed alone can give him a satisfactory advantage.
There are 6 steps of execution in trend riding strategy applied by Grace Cheng, among them are:
Decide how long you want to hold the position. This will determine the choice of time frame trading that best suits your condition. According to Grace Cheng, there are 3 types of time frames that need to be observed in the trend riding strategy, which is time frame large, medium, and small.
Large time frames represent long-term trends, while medium and small time frames each show medium and short term trend identification. The trend observation theory at 3 time frame is not much different from the triple screen trading system described in this article.
Make sure the current market sentiment is in accordance with the trends that are formed on the chart. To recognize and measure these sentiments, you can apply the previous strategy.
As for knowing the direction of the trend, you can use the trendline. In recognizing the price trend, you should also understand the stages of trend forming which, according to Grace Cheng, occurs in 4 phases: nascent, fully charged, aging, and end.
The success of identifying trends will make it easier for you to avoid incorrect entry in the less favorable trend phase.
Observe the validity of the trendline. It can be seen from how often the price test the trendline. The more often the condition occurs, the more valid the trendline.
Confirm direction and trend strength. At this stage, Grace Cheng suggests the use of ADX indicators or oscillators such as Stochastic and MACD.
Entry orders are based on trends in short-term time frames.
Place Stop Loss at least 20 pips from the trendline.
3. Breakout Fading
This strategy is in contrast to trading breakouts that seek to profit from price breaks at important levels. In other words, breakout fading identifies the false breakout signal and tends to be in sync with trading in the sideways market. This strategy is very appropriately applied to quiet markets, with price movements that are less volatile and relatively compliant with support and resistance limits.
For entry order, Grace Cheng recommends traders to stick to small time frames like H1. Meanwhile, Stop Loss is well positioned 20-30 pips beyond the range of support resistance.
4. Breakout Trading
Almost all traders are interested in harvesting big profits in a short time. One of the best forex trading strategies to get it is breakout trading. But in order not to get stuck on the false breakout signal, Grace Cheng confirmed the signs of the breakout by looking at the strengthening of price momentum.
Some of the ideal ways he mentions can be used to know the momentum is, observe the MACD’s histogram movement from level 0, taking into account the overbought and oversold levels of the RSI, and using divergence signals that can be obtained from different price movements with MACD or RSI.
In addition, ensuring entry after price is completely closed below support or above resistance, and knowing market sentiment can also provide further confirmation to avoid false breakout.
5. Breakout From Low Volatility
Still surrounding the breakout strategy, Grace Cheng this time emphasizes the taking of opportunities when price volatility is receding. From here, you may be wondering, why exactly looking for opportunities when volatility is low? Is not its potential will be very small when compared with the breakout when the market is crowded?
What needs to be known here is, Grace Cheng seeks opportunities only in the lead-up to important news releases or important announcements. Thus, he can take advantage of changes in price volatility. Technically, the trader who once managed this PowerFXCourse trading course suggests Bollinger Bands indicator application to detect volatility.
Meanwhile, to see the breakout opportunity, he uses price pattern analysis and observes the price pattern formed on the chart. If the price is forming one of the triangle patterns, then that is the best opportunity for entry with this strategy.
6. Carry Trade
Categorized as a long-term strategy aimed at gaining profit from positive swaps, Grace Cheng recognizes carry trade as a favorite strategy for big players in the forex market. The key to success of this strategy lies largely in the selection of trading pairs. That’s because the pair with 2 currencies whose interest rates differ considerably will provide more benefits.
In addition, fundamental analysis is the foundation for carry trade success, because it is very important for traders to understand and follow the central bank’s rate policy update. As explained in this article, the carry trade strategy is in fact very vulnerable to changes in central bank decisions, especially if the government likes to intervene.
7. News Straddling
The latest best forex trading strategy mentioned by Grace Cheng is news straddling. As the name implies, this strategy is based on high-impact forex news, to seek profit opportunities from large post-news movement moves.
Grace Cheng’s recommendations for this strategy are:
- Focus on major pair, especially EUR / USD.
- Use the intraday time frame (H1 down).
- Determine the support and resistance that make up the price channel.
- Put Pending Order buy and sell above resistance and below support.
- Entry only at the desired price level. If it can not be fulfilled because of the risk of requote or slippage, you should not trade.
To minimize losses if both Pending Orders are touched, place Stop Loss pending buy at 20 pips below resistance, and Stop Loss pending sell 20 pips above support. This is a manual solution that does not necessarily involve external plugins like OCO Order.
The final word
A trading strategy can be best for a trader if he is able to understand and apply it appropriately. It’s useless to apply the best forex trading strategy if it fails to understand its rules. It’s no good anyway you use the best forex trading strategy if you do not know when and where to apply it.
For that, we recommend choosing the easiest strategy you think and carefully learning how to use it. In this case, the best 7 forex trading strategy version of Grace Cheng can be where you start the selection of the most ideal strategy.
Just like Grace Cheng, female character Jean Folger has also adopted a day trading strategy. It has a set of successful tips that are ready to be shared with traders. What are they? Check out more information in this article.