Home Beginners Forex Education Forex Basic Strategies What Is the Best Strategy for Forex Trading in 2021?

What Is the Best Strategy for Forex Trading in 2021?


2020 is over and we must prepare our best Forex strategy to start the year 2021 in the best possible way. Undoubtedly, to define the future of our Forex operation we must take into account the most relevant events and news that we will encounter. Let’s define below some of those we think will most influence when designing the best strategy for Forex next year 2021.

What should we pay attention to? Highly effective news about Covid vaccines can lead to a decrease in the extreme levels of market volatility we saw in 2020 and a return to normality faster than expected. Investors should also consider the need for fiscal stimulus to save the economy before the global availability of vaccines, the increase in cybercrime, the relationship between the United States and China, and the risks to market leadership. Many investors may want to diversify to find high-return assets that can provide a stable source of income. There is broad consensus that the infrastructure sector will be one of the main beneficiaries after potential economic stimuli.

Then, looking at the market outlook for 2021, following the pandemic and the global crisis, next year will present both opportunities and risks for investors, as markets and sectors will rebound unevenly. This has been an unprecedented crisis, with winners and losers, that has entrenched current market trends, accelerating Internet disruption, and worsening the disinflation of the service industry. Therefore, it will be advisable for investors to diversify into different assets to search for their income.

In the year 2020, we have experienced a deep recession and the consequent bearish market, but it has not affected all sectors in the same way. Many companies are at their worst, and others have never really been better. This situation has led to an incredible dispersion in equity yields and credit spreads. In addition, the rebounds of different assets should remind us all that their valuations have as much to do with the discount rate as with the benefits.

The Current Economic Recovery Will Continue

In 2021 we see that the economic recovery will continue, as the latest sanitary innovations allow the normalization of private sector activity. However, with negative real interest rates in all advanced economies and likely to remain so for 2021 and several more years, investors will have to do more to find attractive returns.

The attractiveness of opportunities in alternative assets could increase in this low-return environment for longer. And as we have already mentioned, the infrastructure sector will be one of the main beneficiaries of the global economic stimulus packages and, within the universe of the instruments listed, the low level of return on a fixed income in developed markets will mean that investors will have to have a more global view. For example, dollar-denominated emerging market debt, including Chinese government bonds, can be particularly attractive.

What to Look for In 2021

The COVID-19 pandemic shocked us all during this year 2020, so investors need to consider what surprises the year 2021 could bring and what this will mean for their investment decisions.

1- The rise of cybercrime: the virus and the associated economic shutdowns have led to significant adjustments in telecommuting, which can make some sectors or businesses more vulnerable to the negative effects of a cyber attack.

2- 2021 will be the year of vaccines: highly effective and rapidly distributed vaccines would allow a return to normality sooner than expected. This, coupled with monetary stimuli, can trigger a strong rally in the markets.

3- Fiscal paralysis: Despite low interest rates and economic needs, paralysis in Washington, D.C., and reduced fiscal appetite in Europe mean a bridge to the vaccine is missing in the coming months. This could lead to a double-dip in the economy and markets.

4- Threat to monopoly: A possible change in the tax code and stricter regulation for large technology companies can bring about a major shift in market leadership towards small caps.

5- Improving US-China relations: the new US leadership lays the groundwork for a new engagement with China, including a reduction in tariffs and a reduction in restrictions on technology exports. Reducing uncertainty and improving the business landscape catalyse a significant shift in the flow of assets from developed to emerging markets.

Best Strategy for 2021?

The search for the “best strategy” in Forex is eternal. Most new “traders”, even some of the most experienced spend their whole lives looking, unsuccessfully, either in forums, books, and seminars, for the superior strategy to all the others.

We think what you should know about “the best” strategy is this:

It doesn’t exist!

Not only is there a way to do that, but there are many ways. This applies to successful strategies or methods of trading currencies as well. The different negotiating styles used by professionals specializing in making money consistently in the market are countless; just as each individual has his own type of DNA. That makes a lot of sense, as trade numbers and indicators, oscillators, and concepts are infinite as well as how these can be combined. Therefore, long searches for perfection in the buying and selling of currency sooner or later lead to disappointment.

Have you ever heard the saying “the best attack is sometimes a good defense”? This is a great truth that applies not only in the legal field but also in the currency market. Even an excellent entry strategy (what would be the offense) becomes weak if it does not have a good exit plan (what would be the defense). All traders employing strategies such as Martingale (a strategy that continues to increase losing transactions, thereby anticipating a setback) or other flawed exit methodology that keeps large open losses waiting for the market to return, are doomed to failure.

The best strategy can quickly become the worst if traders’ minds are not attuned to success. You will have heard experts say over and over again: “Trading is mostly mental”, this is a universal truth based on the law of attraction (which has become a buzzword because of the movie “The Secret”).

In Conclusion… 

The search for “the best” strategy to trade on Forex is useless. Instead, the trader should focus on the above three points to maximize their success in buying and selling currency. The best Forex strategy is a personal decision for each trader, but we must always understand it perfectly and we must identify with it. It should be consistent with our resources, and, speaking of resources, it should be cost-effective. And most importantly, we should feel comfortable with the strategy.

It becomes obvious because it is important to practice on a demo account, the possibilities are many and the more options, the greater the indecision. When testing on demo accounts, it’s time for the truth, and that’s where we can find our best Forex strategy. In a demo account, we have total freedom to experiment and test with many different strategies. Then, we can circumvent any limiting aspect and make attempts with everything we desire. It is now that we can make mistakes, refine small details, polish what is needed, and learn as much as possible.


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