The Best Forex Trading Strategies for Beginners
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We all know that the forex market (also known as the Foreign Exchange Market or simply FX) is the most liquid financial market in the world. This makes it highly popular and appealing among individuals of all backgrounds and locations.
The accessibility of the forex market, in addition to the profit-earning potential it presents to people have sky-rocketed its popularity in recent years.
Due to those reasons and more, many traders have established a name for themselves among the trading community.
Moreover, those experienced players have spent a lot of time, energy and resources into perfecting strategies and crafting plans and tactics which have proven to be successful in trading.
Those strategies and trading wisdom have been shared and passed down to beginner traders who are just making their first steps in trading and we, at Trading Education, wanted to outline some of the best and most popular trading strategies just for you.
For beginner traders, it’s of great importance to spend a significant amount of time searching for forex trading courses, beginner’s trading guides, lectures, videos and various other types of educational materials.
Moreover, beginner traders use the knowledge they obtain to develop early trading strategies and draw meaningful conclusions that can help them in the future.
They seek the wisdom of the experienced traders and try to discover which strategy might be the most useful and suitable for their newly-established trading style.
There are numerous trading techniques and tactics to adopt and that can surely confuse the newbies.
Therefore, to make it more convenient for them, we wanted to introduce some key forex strategies we believe beginners can use for their initial steps in the market.
Keep in mind that if you are a beginner, at this step you have to understand the concepts and give it time to add more complicated procedures and actions, once you have mastered the foundations. For now, you might have to start with strategies that are considered effective and don’t require a lot of observation, analysis or maintenance.
What are the best strategies for beginners?
It’s advisable for beginners to not jump right into the more complicated strategies.
Before we get down to the specifics, we have to mention a few of the important elements that should go hand in hand with your trading strategy.
To make sure you are on top, there are some elements you need to be aware of, such as your level of education, time and money management, emotional preparation, consistency, timing and more.
Moreover, whether you are a beginner or a more advanced trader, you have to take into consideration things like liquidity, volume, and volatility.
Once you’ve checked all these elements and are aware of how to handle and manage the basics of a plain trading strategy, you are ready to explore the more complex areas that include technical indicators and more.
Let’s get to the strategies!
This strategy is absolutely essential for beginners as it is not only the most fundamental one but also very simple and easy to understand and master.
The idea behind is that you have to keep an eye on the trend and open your position in the direction of the trend.
Market trends are usually long, medium or short-term. Before that, you also have to decide if you want a long-term or a short-term strategy which in its turn will give you an idea of what type of charts to use.
All in all, this strategy requires a close observation of charts and patterns for even a slight change.
The traders will benefit from the “ups and downs” of the financial markets, jumping on the trend without the need to predict or calculate specific price levels.
#Use of Trend Lines
One of the most effective and easy to understand concepts that will help you in trading is trend lines. Basically, you draw a straight line that connects two different points on a chart.
The trendlines are connecting prices together. The line that forms presents the trader with a concept of direction where the value of an investment might move.
If you learn how to draw the trend lines on your own charts, this might increase your chances of making a successful trade.
It’s easy - if the trend is down, you draw the line over the chart. If the trend line gets broken, that would immediately alert the trader that the trend is changing.
Breakouts are a good indicator for traders because when they occur, they are usually seen as a signal that shows that a new upward trend is beginning.
A breakout basically happens when a market moves to new directions, beyond the support and resistance indicators.
Keep in mind that the participants are the ones defining those levels, basically showcasing the supply and demand, which can change rapidly.
Not every breakout results in new trends, however, it’s still a good trading opportunity for traders to be on the right spot at the right time and enter an emerging trend early on.
Momentum is a popular strategy, especially for beginners. It’s basically a technique in which traders can buy or sell currencies, based on recent price trends.
Through this concept, a trader can determine how likely it is for a trade to turn out profitable.
In trading, momentum is determined by aspects like trading volume or the rate in which price changes.
If an asset price is moving strongly in a direction, a trader that uses the momentum technique will bet that this price will keep moving in that direction.
#Daily Fibonacci Pivot Trade
Don’t get scared by the name of the strategy - it’s not as confusing as it actually sounds.
This particular strategy utilizes the Fibonacci retracements as a basis, combined with the daily, (weekly or monthly) pivot levels.
All this would result in providing trade entry points. The parameters for the Fibonacci levels can be chosen by the trader, however, some of the most common pics are 38% or 50%.
This type of strategy is not just used by beginners but by professional traders as well because it is relatively simple to understand and then implement.
The idea of the carry trade is to profit from the yield difference between a pair of currencies.
Basically, it means that the interest rate of the currency you are buying is higher than of the currency you are selling. The difference between those interest rates will determine the profit you will get.
#Simple Moving Average Crossover (SMA)
Another good forex strategy for beginners focuses on utilizing the so-called simple moving average (SMA).
Through SMA, traders can identify trend direction and can use it to also set up buy and sell signals.
The SMA is basically taking older data from a set period of time (around 30 days, for example, which is considered a shorter SMA) and then use it to showcase the average price of a financial instrument.
#Bolly Band Bounce Trade
The Bolly Band Bounce Trade is a suitable strategy for the ranging market. Some traders don’t like to trade in a range market and just wait until the trend becomes definite, however, this strategy is certainly a very good way to cope with the restricted range of price movements.
The Bolly Band forms a limit, right around the short-term price movement.
#Forex Dual Stochastic Trade
The Forex Dual Stochastic Trade helps traders by giving them a sign that a price might be trending but it's overextended.
Therefore, the traders should change their position on that particular asset.
#The Bladerunner Reversal
The Bladerunner Reversal strategy is widely-considered as one of the most effective forex trading strategies.
It requires a certain level of experience if you want to use it, therefore, it is not suggested for the traders who are still trying to figure out what forex is.
Implementing it, however, can be simple.
Basically, it’s a price action strategy and it aims to spot the most favourable entry points in a certain trade. The strategy is suitable across any currency pair.
When you pick strategies to trade, you have to consider not only your level of knowledge in forex but also do your own market research as to whether the strategy you choose is truly suitable for your goals and if there is enough evidence of the reliability of that particular strategy.
The strategies we have presented above can be good for beginners, however, most of them are used by professionals as well.
Of course, there are plenty more that can come in handy once you feel confident enough with your skills as a forex trader.
Start with the basics and keep on adding or experimenting with new strategies, like some from our list. It’s also advisable to have an experienced guide beside you to explain in more detail how to make the best out of them.
Keep in mind that everything might seem simpler at first read/try, however, at that early stage of your trading career you shouldn’t underestimate the market and learn carefully step by step.
We would also like to remind you that at www.trading-education.com you can receive a free forex education and learn all about forex and the various concepts, techniques and tools that you must be aware of.
Knowledge is just one click or call away!