How To Find A Profitable Trading Strategy

Finding a profitable trading strategy in the forex markets is not easy. In fact, it can take years for traders to finally find a strategy that starts to earn a profit in the markets. This often leads to traders wasting a lot of time and most even giving up on their journey before it’s really even started!

The reality is, finding a trading strategy is not too tricky, thanks to the huge amount of information online. However, most information you read online is not accurate, and therefore you must approach this with a level of due diligence.

In this article, we’ll look at exactly how you can find a profitable trading strategy in 2024. So, let’s get into it!

How To Find A Profitable Trading Strategy

Traders are known for hopping from one strategy to another, constantly chasing a profitable trading strategy. Many traders get blinded by the prospect of wealth and a great lifestyle and end up following the advice of unprofitable traders. Many of our prop firm funded traders started by going down this route, before realizing their mentor was not profitable.

So, let’s take a look at your options for either finding or building a profitable strategy.

Option 1 – Testing

This first option is potentially the best option in the long run, but it’s going to be a very long game. Many of our profitable funded traders have found their strategies through simply observing the markets for many years and stumbling across an edge.

This is certainly possible, but it genuinely takes thousands of hours of study to find an edge in the market – if you can ever find one. With that being said, we’ve seen it done and some of the best traders we have funded either invented their strategy or found it without seeking external advice. It’s realistic to expect this process to take years. There will be a huge amount of trial and error, along with mountains of back testing, forward testing and ideation.

If you’re brand new to forex trading, we’d advise that you do not go down this route, as it’s likely you do not have enough ‘chart hours’ yet to see an edge playing out over time. This is something we’d recommend experienced traders do, once they have years under their belt.

Option 2 – Research Papers

This is potentially the best way to find new profitable trading strategies to use in the markets. Many funds, hedge funds, universities, and research groups have released research papers detailing the profitability of different strategies in the markets. These reports are all unbiased and contain everything you need to know to recreate the strategy yourself – at no cost. We’ve seen countless strategies being released which do have a profitable edge over a 5-10 year period.

You must approach these strategies with a long-term view in mind. Hedge funds aren’t releasing papers talking about strategies doing 15% a month like retail traders want to believe. Most funds are just aiming to beat the S&P 500 as a benchmark. Many of the strategies you’ll read about can be tweaked, tested on different time frames and currency pairs, and adaptations can be made to increase the profitability.

Much like with the other methods, this won’t be a ‘plug and play’ kind of exercise. You’ll still need to do a huge amount of back testing, forward testing and tweaking to make these strategies work for you – but it’s a great foundation to build from!

Option 3 – YouTube & Forums

YouTube and online trading forums can be great for finding trading strategies. However, you must approach this method with a lot of due diligence. You’re going to run into many ‘traders’ selling their strategies or mentorship. You’ll run into plenty of traders making videos about trading, but never actually profitably traded themselves. This is very common, and you can easily get swept down the wrong road.

However, if you approach this sensibly, you can find some nuggets that are in the forums.

It’s crucial to not pay traders for their strategies, or trade any of these strategies on a live account without a huge amount of back testing. Use this for ideation. If someone is claiming to have a profitable trading strategy by trading gold on the market open and holding for the week – great. Don’t take this as gospel. Instead, back test this strategy objectively for years. Track all trades in a spreadsheet or automate the strategy and run it on a demo account.

You must assume that all strategies you find are not profitable. However, with a bit of luck, a lot of back testing and a bit of tweaking, there are profitable trading strategies out there for you to find.

Option 4 – Reverse Engineering EA’s

Another great way to find profitable trading strategies is to reverse engineer successful trading algorithms. There are many online marketplaces that sell trading bots with many years of track record. It’s worth pointing out that many of these algorithms have a flaw in their risk management approach. Most of these bots you’ll find are doomed to fail.

However, some entry strategies and exit strategies are really great, and it’s just the risk management that lets the system down. If you could spend some time finding a few profitable EA’s, then reverse engineer the trading strategy, then add various risk management approaches – you may be able to etch out a relatively good edge in the markets. It’s important not to purchase many bots in this process, as your costs will be mounting up fast. Instead, use the information from the developers and free demos to start piecing together how the bot is running, and then start testing your adaptations.

Again, we’ve seen some of our funded traders do this and yield great results.

In Summary – Finding A Profitable Forex Trading System

If you’re looking to find a profitable trading strategy, you have 4 main options. Either creating your own strategy, reading research papers, using free online resources or reverse engineering trading bots. Either one or a combination of these approaches should yield a profitable trading strategy after months of trial, error and back testing. Whichever route you decide, ensure you approach it with the adequate due diligence and do a huge amount of backtests, forward texts and research.

Once you have your profitable trading strategy, why not get funded and start trading larger capital. Are you looking to become a funded trader? Work with Lux Trading Firm!