1. Who is Grace Cheng?Before becoming a successful forex trader, Grace Cheng graduated from 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 he finally decided to explore forex trading.
Grace Cheng spent a lot of time on demo accounts before finally establishing herself as a full-time trader. He likes to trade in major pairs like EUR / USD and USD/CHF, as well as using day trading strategies.
Grace Cheng then created a blog and published her trading diary there. Unexpectedly, his courage was fruity because the success of trading which was outlined in his blog managed to attract many visitors from various countries, including Britain and the United States. In addition, Grace Cheng contributed to various popular media such as Technical Analysis of Stocks & Commodities, The Trader's Journal, The Forex Journal, Investopedia, and Smart Investors.
Grace Cheng was then contacted by one of the UK's publishing companies, Harriman House, who offered him cooperation to make forex trading books. From there, the work of Grace Cheng was born as the inspiration for this article, namely a book titled 7 Winning Strategies for Forex Trading.
2. Then what are the 7 forex trading strategies discussed in his book?
1. Following Market SentimentThis technique is actually only one part of the overall trading strategy which usually involves entry and exit rules. However, following market sentiment can be the most important foundation in making trading decisions.
Grace Cheng uses fundamental knowledge to find out the market sentiment, which she thinks can be identified in 3 types: bullish, bearish, and uncertain. Understanding of economic indicators was highlighted as the knowledge that traders need to learn in order to master this strategy.
Not enough just to know the market sentiment, Grace Cheng also recommends traders to measure their strength. The method he chooses to identify the strength of sentiment is by listening to the Commitment of Traders (COT) data release, and price movement analysis after an important fundamental data is published.
2. Riding Trend Or Trend Following
Trend riding, or often known as the trend following is one of Grace Cheng's mainstay strategies. The Singaporean female trader admitted that she never fought how to anticipate changes in the direction of the trend so that she could catch the opportunity as early as possible. Based on his experience so far, just following the established trend can give him a satisfying advantage.
There are 6 steps of execution in the trend riding strategy applied by Grace Cheng, including
1. Determine how long you want to hold the position. This will determine the choice of trading time frame that best suits your condition. According to Grace Cheng, there are 3 types of time frames that need to be observed in trend riding strategies, namely large, medium and small time frames.
Large time frames represent long-term trends, while medium and small time frames each indicate the identification of medium and short-term trends.
2. Make sure the current market sentiment is in accordance with the trend formed on the chart. To recognize and measure these sentiments, you can apply the strategy beforehand.
While to find out the direction of the trend, you can use the trendline. In recognizing price trends, you should also understand the stages of trend formation which according to Grace Cheng occur in 4 phases: nascent (newly formed), fully charged (moving fast), ageing (slowing down), and ending.
The success of identifying trends will make it easier for you to avoid wrong entry in the trend phase that is not very profitable.
3 Observe trendline validity. This can be seen from how often prices test the trendline. The more often the condition occurs, the more trendline is valid.
4. Confirm the direction and strength of the trend. At this stage, Grace Cheng suggested using ADX indicators or oscillators such as Stochastic and MACD.
5. Entry orders based on trends in short-term time frames.
6. Place a Stop Loss at least 20 pips from the trendline.
3. Breakout FadingThis strategy is in contrast to trading breakouts that are looking for profits from price breaks at important levels. In other words, breakout fading identifies false breakout signals and tends to be aligned with the way of trading on sideways markets. This strategy is very appropriate to be applied to a quiet market, with price movements that are not too volatile and relatively adhere to the limits of support and resistance.
For entry orders, Grace Cheng recommends traders to rely on small time frames like H1. Meanwhile, Stop-Loss is better positioned 20-30 pips outside 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 with a false breakout signal, Grace Cheng confirmed signs of a breakout by looking at strengthening price momentum.
Some of the ideal ways he calls can be used to find out the momentum are, observing the MACD histogram movement from level 0, paying attention to overbought and oversold RSI levels, and using signal divergence which can be obtained from the difference in price movements with MACD or RSI.
In addition, ensure entry after the price is completely closed below support or above resistance, and knowing the market sentiment can also provide further confirmation to avoid false breakouts.
5. Breakout of Low VolatilityStill around the breakout strategy, Grace Cheng this time emphasized taking opportunities when price volatility was receding. From here, you might wonder, why are you looking for opportunities when volatility is low? Isn't the potential very small compared to the breakout when the market is crowded?
What you need to know here is, Grace Cheng is looking for opportunities only at the moment before the news release or important fundamental announcement. Thus, he can take advantage of changes in price volatility. Technically, traders who have managed PowerFXCourse trading courses recommend the Bollinger Bands indicator application to detect volatility.
Whereas to see the opportunity for a breakout, he uses a price pattern analysis and looks at the price patterns 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 TradeCategorized as a long-term strategy that aims to profit from positive swaps, Grace Cheng recognizes carry trades as a favorite strategy for big players in the forex market. The key to the success of this strategy lies largely in the selection of trading pairs. This is because the pair with 2 currencies with different interest rates will provide more benefits.
7. News StraddlingThe last 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 find profit opportunities from large movements after the news release.
Grace Cheng's recommendations for this strategy are:
*Focus on major pairs, especially EUR / USD.
*Use the intraday time frame (H1 down).
*Determine the support and resistance that form the price channel.
*Put Pending Orders buy and sell above resistance and below support.
*Entry is only at the desired price level. If that cannot be fulfilled because of the risk of requotes or slippage, you should not trade.
*To minimize losses if both Pending Orders are touched, place Stop-Loss pending at a distance of 20 pips below resistance, and Stop Loss pending sell 20 pips above support. This is a manual solution that does not need to involve external plugins such as OCO Orders.
For that, you should choose the strategy that is easiest for you and learn carefully about its use. In this case, 7 of the best forex trading strategies by Grace Cheng can be where you start the most ideal strategy selection.