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7 Best Forex Trading Strategies for Beginners
The simple act of buying or selling currencies is known as Forex trading. Traders apply various strategies to determine the best entry and exit points for the currencies in pairs that they purchase on the Forex exchange marketplace.
The main goal of any trader who invests his time and money into this currency trading is to earn a profit which is why it is something that has to be taken very seriously.
It is possible to make a good profit on your trades if you are applying the right strategies with the most accurate of all timings.
Strategies are nothing more than a collection of data that has been tried and tested again and again to refine them over time.
Traders make the most of such strategies to keep themselves ahead of the curve.
The smartest traders always try to combine multiple strategies and implement them simultaneously to predict the trends of the market, determine when to enter or exit a trade, know which currency pairs to avoid and which currency pairs to target, etc.
With that being said, let us take a look at some of the most efficient Forex trading strategies for beginners.
The Breakout Strategy
The traders who follow the breakout strategy try to enter the market when they see it coming out of the preceding trading range.
The goal is to wait and see where the price levels are heading.
If the price starts climbing more than the resistance level it had before, then the trader will choose to enter this breaking point in the hopes that the climbing trend will continue.
Similarly, if the price overtakes the support level of the previous trend, then the trader will choose to sell assuming that the market trend will continue on a downward spiral.
Although breakouts are usually seen as the signal of a new upward trend when the market is moving in a new direction, keep in mind that not every breakout will result in a new trend and some of them might simply be a dead-end.
Carry Trade Strategy
The Carry Trade Forex strategy is said to be one of the most unique ones among fx traders as it lets them make a little extra profit if they time it correctly.
The Carry Trade strategy lets traders take advantage of the interest rate differential that arises between two country’s currencies.
Traders make extra profit by following this strategy by selling out the currency of a country with significantly lower interest rates and buying the currency of a country that has a higher interest rate.
The difference between both the currencies’ interest rates will play a significant role in your profits if this particular strategy is in effect.
Position Trading Strategy
The Position Trading Strategy is one of the best forex trading strategies for beginners who are very new to the concepts of fx trading and want to get hands-on experience with lesser risks and effort.
This strategy works by focusing entirely on long term positions that last for weeks, or even years in some cases!
Traders using this strategy keep their leverage relatively low and aim for profits using the bigger price movements that last longer periods.
Patience is the key for position traders as they trade like fishermen waiting to hook a big fish.
One of the best things about position trading is that it does not require you to be glued to your trading account and charts all the time.
Minor price fluctuations are no cause for worry as they are insignificant for a position trader’s plan.
Range Trading Strategy
Source : https://www.udemy.com/course/advanced-volatility-trading-vxx-ultimate-trading-experience/
This strategy involves operation in a price range that is known to be steady and reliable as the assumption behind Range Trading is that prices can only stay constant for a short period.
The important thing to look out for while range trading is the most favourable price spot for entry which can be easily identified by support or resistance levels of the trend that you are following.
Traders implementing this strategy are known to either buy or sell their positions at predictable highs or lows whichever suits them the best.
An important thing to keep in mind is that range trading is a strategy that is best-suited for currencies or economies that are stable.
Trend Trading Strategy
Source : https://www.udemy.com/course/mastering-candlestick-charting/
This is also one of the best forex trading strategies for beginners, the Trend Trading strategy requires the user to follow the market trends so they can make better trading decisions.
The trader looks for the movement of the currency price to see which trend it is following. The entry point is determined after confirming the direction of the trend.
Various tools are used to determine the direction of the trend accurately. Some of those tools are the moving average, relative strength indicators, stochastic, and many more.
One of the best things characteristic of this strategy is that it is entirely possible to make good profits even if the trader fails to identify the trend direction by getting in as early as he can.
Things to keep in mind if you choose to implement relative trading are that the trends that you will be monitoring are heavily influenced by current affairs.
Political instability, war, natural disaster or some other unforeseen circumstances should be given extra priority to make your strategy fool-proof.
Price Action Strategy
Source : https://investorjunkie.com/investing/buy-hold-vs-active-trading/
Price Action strategy is the most used trading strategy by beginners in forex trading.
The speciality of this strategy is that it does not require you to use indicators which makes it easier to use for a beginner.
All you have to do is identify which entity controls the price and formulate your plan accordingly.
In case the entity behind the price control is a bull then the trader should consider buying and if it is a bear then the trader should consider selling.
One of the things about this strategy is that it can be used in almost any market condition whether it is highly volatile or relatively less volatile.
Counter Trend Trading Strategy
This particular trading strategy is quite famous among beginners as they are often known to use Counter Trending to catapult themselves to the next level.
It is a medium-term trading strategy in which positions are held up to several weeks and it also happens to have a high success rate.
This strategy works on the belief that trends reverse themselves in time which is where the traders aim for profit.
The only tough aspect of this strategy can be predicting the reversals accurately due to the volatile nature of the market.
Picking the right strategy may require you to properly research the market and expand your knowledge of it.
Remember to stick to the basics especially when you are a beginner and keep experimenting with them to form your custom trading strategies.
You must never underestimate the market and have backup plans ready in case your predictions or analysis was wrong.
Furthermore, many of these strategies require you to have a healthy amount of capital so be sure to research every one of them and determine which one suits your trading style the best.
Once you have mastered the basic ones and firmly grasped the principles behind them, move on to the ones that are more complex, and improve your skills as a forex trader.
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