The Best Forex Trading Strategies for Beginners
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Given the fact that the forex market is the largest financial market in the world, it’s no surprise that more and more beginners are interested in exploring its amazing complexities.
To help you get started, though, you have to establish a successful forex trading strategy.
Here you can learn more about the best forex trading strategies for beginners and also sign up for our forex trading course to help you become a forex trading ace.
Forex Trading Strategies Explained
We all know that the forex market 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 its profit-earning potential, has sky-rocketed its popularity among beginner traders and experts alike.
Following a forex trading strategy is the key to success. Any forex trading strategy can be defined as a financial plan based on strong indicators to help traders gain a profitable return from buying and selling forex.
The Importance of Establishing a Forex Trading Strategy
Whether you are just taking your first steps into forex trading or have already established a name for yourself in the trading community, the truth is that having a forex trading strategy is crucial.
For beginner traders, in particular, it’s of great importance to spend a significant amount of time searching for forex trading strategies and forex trading educational materials. Forex trading strategies allow beginner traders to draw meaningful financial conclusions that can help them in the future.
Beginners can also seek the wisdom of the experienced traders in the field in order to discover which strategy might be the most suitable for their newly-established forex trading style. As a matter of fact, experienced forex players have spent a lot of time, energy, and resources into perfecting their forex trading strategies as well as crafting plans and tactics.
What Are the Best Strategies for Beginners?
The forex trading market is a complex field and forex trading strategies have to tame the market’s liquidity, volume, and volatility.
Numerous forex trading techniques and tactics exist, which can surely confuse newbies. Thus, here are some key forex strategies that beginners can use for their initial steps in the market.
Once you become aware of how to handle and manage the basics of a plain forex trading strategy, you will be ready to explore the more complex areas of forex trading.
Devising a profitable forex trading strategy is possible, so let’s get to the strategies!
Trend Following Trading Strategy
Trend following is one of the most essential forex trading strategies to help newbies become experts in the field.
This strategy is also pretty straightforward to understand and master. The idea behind it is that forex traders can benefit from the “ups and downs” of the financial market. You just have to keep an eye on the trend, assuming that the trend will continue to follow the same direction. All in all, trend following is a strategy that requires close observation of charts, patterns, and changes.
Here we should note that market trends are usually long-, medium-, or short-term. So you will have to decide if you want a long-term or a short-term strategy, which in turn will give you an idea of what type of data and charts to use. Learn more about trend following strategies and how to use them.
Trend Line Trading Strategy
When it comes to charts and indicators, one of the most effective forex trading strategies is the use of trend lines. Basically, you draw a straight line that connects at least two different price points on a chart.
Trend lines present the trader with an indication of price movements and directions, assuming that the forex market always moves in trends.
If you learn how to draw proper trend lines on your own charts, this might increase your chances of making a successful trade.
Forex Trading Breakout Strategy
Taking advantage of breakouts is another effective forex trading strategy. Breakouts are a good indicator for beginner traders because they can show when a new upward trend is beginning.
A breakout basically happens when a market moves in a new direction, beyond its support and resistance indicators. Keep in mind that it’s the participants who define those changes, showcasing the supply and demand.
Though not every breakout results in a new trend, this forex trading strategy is still a good trading opportunity to be on the right spot at the right time in order to enter an emerging trend early on.
Momentum Forex Trading Strategy
Momentum is one of the most popular forex trading strategies for beginners. It’s a trading technique in which traders can buy or sell currencies based on recent price trends.
In trading, momentum is determined by aspects like trading volume or the rate with which prices change. This strategy is based on news releases and trends supported by high volumes. If an asset price is moving in a certain direction, a trader who uses the momentum forex trading strategy will trade, betting that this price will keep moving in the same direction.
In fact, figures show that every day there is at least one stock that can move up to 30%, so it’s vital to keep an eye on different trading announcements and market news.
Daily Fibonacci Pivot Forex Trading Strategy
Don’t let the name of this forex trading strategy scare you - it’s not as confusing as it sounds!
This strategy uses Fibonacci retracements, combined with daily (weekly or monthly) pivot levels, to calculate support and resistance levels.
All this would result in providing certain trade entry points. Though the parameters for the Fibonacci levels can be chosen by the trader, experts say that most forex traders use 38.2%, 61.8%, and even 100% retracements in their forex trading plans.
Carry Trade Strategy
There are many forex trading strategies that can benefit both experts and beginners. Carry trade strategies, for instance, are effective trading strategies that can be used not only by beginners but by professional traders. This approach is relatively simple to understand and implement.
The implementation of the carry trade strategy can help beginners succeed and profit from the yield difference between a pair of currencies.
In other words, the interest rate of the currency you are buying should be higher than that of the currency you are selling. The difference between those interest rates will determine the profit you might make.
Simple Moving Average Crossover Strategy
Moving average strategies can benefit pros and newbies alike. One of the most suitable forex trading strategies for beginners is the simple moving average crossover method.
This strategy focuses on utilising the so-called simple moving average (SMA). We should note that this forex trading strategy requires the identification of three moving average factors: fast-moving, slow-moving, and trend indicator.
Through SMA, traders can identify different trend directions to set up buy and sell signals. The SMA is basically taking older data from a set period (around 30 days, for example, which is considered a shorter SMA) and then using it to showcase the average price of a financial instrument.
Bolly Band Bounce Strategy
Though many forex trading strategies rely on distinct trades, the Bolly Band Bounce strategy allows traders to trade even when trends are absent.
The Bolly Band Bounce forex trading strategy is a suitable strategy for the ranging market; a very good way to cope with the restricted range of price movements.
Here we should note that the Bolly Band Bounce strategy relies on Bollinger Bands to form a limit for short-term price movements.
Forex Dual Stochastic Trade Strategy
The Forex Dual Stochastic Trade is a successful forex trading strategy based on combining a slow and fast stochastic. To be more precise, this strategy can help forex traders by giving them an indication that a price is trending but overextended.
This forex trading strategy looks relatively simple; however, beginner traders need to obtain some technical analysis knowledge before mastering it.
Learn how to become a successful part-time forex trader before becoming a full-time ace in forex trading.
Fading in Forex Trading
Fading is another suitable forex trading strategy that can help beginners learn forex trading and conquer the forex market.
Note, however, that fading can be risky as it is used to trade against prevailing trends. In other words, this counter-trading strategy allows forex traders to take an opposite position after a change with strong momentum.
Thus, close observation and timing become crucial. After all, well-prepared traders are successful traders who know that forex trading can be easy.
Becoming a Pro | How to Enjoy Your Forex Trading Journey
Establishing a successful forex trading strategy is essential to help you become a pro in forex trading. When you master the art of forex trading with a successful forex trading plan, you can move to more complex strategies, such as the Bladerunner Reversal strategy and scalping.
Note that the Bladerunner Reversal is one of the most effective forex trading strategies. Nevertheless, as any reversal trading strategy, it requires a certain level of experience, so it is not suitable for the traders who are still trying to figure out what forex is.
Interestingly, another highly risky technique suitable for experts is scalping. Scalping is defined as one of the most demanding ways to trade forex - a method to make a huge profit via many small trades. Learn more about some of the most famous day traders across the globe and their forex trading secrets.
- Forex trading attracts more and more beginners from all over the world.
- Newbies are encouraged to start with a simpler forex trading strategy in order to understand the forex trading market.
- Some of the most popular forex trading strategies suitable for beginners include trend following, momentum, carry trade, and fading.
When you pick forex trading strategies, you have to consider your level of knowledge. Always do your own market research as to whether the strategy you choose is truly suitable for your goals. When you get enough evidence of the reliability of your strategy, it’s time to establish a forex trading style to become a real expert in the field.
Though the strategies we have presented above are great for beginners, do not forget that 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.
Thus, we would like to remind you that at www.trading-education.com, you can receive free forex education and learn more about forex and forex trading strategies. Knowledge is just one click/call away!
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