A top 5 list of trading strategies that work has been compiled after extensive testing by Trading Rush. The Ichimoku Cloud strategy takes the second spot due to its all-round suitability. The MACD strategy has the highest win rate and took the top spot. Useful indicators including the ATR, Parabolic SAR and VWAP are also discussed. Trading Rush provides backtesting clips for all strategies on their website or app. Money management is emphasized throughout, and beginners are advised to follow the trend.

Top 5 Trading Strategies That Actually Work: Backtesting Results

Introduction

Testing multiple trading strategies over time is a necessary activity that traders need to undertake to identify the most profitable ones. In this article, we present the top five trading strategies that actually work based on backtesting results. These strategies are suitable for both stock and forex traders, particularly those who are just starting to learn about trading with no prior knowledge about profitable strategies.

Moving Average Crossover Strategy

The moving average crossover strategy is one of the simplest and most popular trading strategies for swing trading. This strategy involves the use of either exponential moving average (EMA) or simple moving average (SMA) to buy when the shorter-term moving average crosses above the longer-term moving average and sell when the opposite occurs. Although the win rate is not as high as other strategies on this list, it does show profitability in the long run.

Alligator Trading Strategy

The alligator trading strategy is similar to the moving average crossover strategy but performs slightly better due to its ability to detect if the price is ranging or not. This strategy uses three smoothed moving averages, each with different time periods, to identify the trend. The win rate for this strategy with a reward to risk ratio of 1.5:1 was approximately 50%, making it a profitable strategy.

Bollinger Bands Strategy

The Bollinger Bands strategy is based on using the bands as a volatility indicator. This strategy involves buying when the price is at the lower band and selling when the price is at the upper band, with a win rate of approximately 55%. This strategy can be modified to filter out false signals, leading to better results.

Ichimoku Cloud Trading Strategy

The Ichimoku Cloud trading strategy is ideal for those who want a complete package. This strategy provides entry signals, shows where to set your stop-loss, tells you when to avoid trading, and even shows the direction of the trend. Although it may look complicated at first glance, the more you learn about the indicator, the better you will be at trading. This strategy takes the second spot on this list, given its many benefits.

MACD Trading Strategy

The MACD trading strategy had the highest win rate among the strategies tested, at over 60%. This strategy involves using moving averages and measures the relationship between short-term and long-term trends to provide entry and exit signals. With proper money management, this strategy can be simple and effective, making it a great option for beginner traders.

Honorable Mentions

While not making the top five list, some trading tools that are useful in forex and stock trading include the ATR indicator, Parabolic SAR indicator, and VWAP indicator. The ATR indicator can help with setting stop-losses, while the Parabolic SAR indicator can be used as a trailing stop-loss indicator. The VWAP indicator is a tool that shows the Volume Weighted Average Price, particularly helpful for seeing where institutional buyers are most likely to take trades.

Conclusion

Based on backtesting results, the top five trading strategies that actually work are the moving average crossover strategy, alligator trading strategy, Bollinger Bands strategy, Ichimoku Cloud trading strategy, and MACD trading strategy. Each strategy has its own strengths and weaknesses, and traders should select a strategy that best fits their trading style and preferences. While not making the top five, honorable mentions include useful trading tools, such as the ATR indicator, Parabolic SAR indicator, and VWAP indicator.