Best Forex Trading Strategies For Beginners
The forex market is no longer confined to the scope of institutional trading. The largest trading market is now open to all types of traders and offers countless opportunities to new retail traders who want to make profits from the volatile currency pairs. The forex world has expanded and evolved to a level where trading is borderless and anyone can easily access the forex space through a virtual platform. But being a complete beginner in the dynamic forex market is a challenge that you need to face head on. Passing this challenge will take some time, effort, skills and a well-defined strategy.
Hence, we will be sharing some of the best forex trading strategies that beginners can follow for marking a successful beginning to their trading journey.
Basic Of Forex Trading
Before we dive into the details of best forex trading strategies, let’s take some time to understand some basic concepts of forex trading. The trading instrument in the forex market is international currency pairs which primarily means that you trade by anticipating exchange rate fluctuations. The most traded currency pair in the forex market is EUR/USD. Here the base currency is Euro, and its value will be quoted against the US Dollar. If you expect a rise in the value of the Euro, you will buy the pair which is referred to as going long. If you expect a fall in value of Euro, you will be selling the pair which is referred to as going short.
The price movements of currency pairs is measured in a special unit called ‘pips’. 1 pip is equal to 0.01 for currency pairs including Japanese Yen and for all other pairs, it is 0.0001. Calculation of pips is a very basic yet essential concept of forex that every beginner should learn about. To start trading in the forex market, you will need to open a trading account with a forex broker and then you can login to the trading platform integrated with the broker.
What Is A Forex Trading Strategy?
The process of trading needs to be carried out with a clearly defined action plan. This action plan is called a forex trading strategy. The strategy will give justification and reasoning for all your moves and trade positions. The type of trading style you follow, how you spot ideal trade setups, what type of analysis you rely on for finding good opportunities and many such things will be clearly stated with the strategy you follow. This strategy can either be a popular one that is already followed by many traders or you can devise a completely new one based on your skill level.
Beginners should take some time to understand and learn about popular trading strategies first before anything else. You can start with a simple and comprehensive strategy and then start modifying it to suit your requirements as a trader. You can switch to more advanced and complex strategies once you gain enough experience in trading. This approach would be ideal for a newbie as otherwise you may feel confused and overwhelmed in the fast moving market space.
Now we will have a look at some of the popular forex trading strategies that newbies can start with.
Best Forex Trading Strategies For Beginners
Trend trading is one of the simplest strategies to follow and this makes it a favourite choice of novice forex traders. This strategy is primarily concerned with spotting the market trend and following it. You might have heard the phrase that ‘trend is your friend’ and this truly applies when it comes to forex trading. You can apply this strategy by just learning to read chart patterns, which is the essence of technical analysis. You can also add some simple yet powerful indicators like Moving averages and RSI to assist you in the decision making process. You just need to determine the direction of the trend and trade by using it as a base.
Price breakouts are a common phenomenon in the forex market and this makes breakout trading a popular strategy as well. A breakout can be described as a situation in which a currency pair’s price breaks away from a consolidated phase and starts to move more. Drawing trend lines in a chart is the best way to identify a breakout but make sure that you use some indicators along with it as false breakouts are a thing in the forex space. Trading a false breakout may result in losses and you need to confirm the breakout before trying this strategy.
Another simple strategy that forex beginners can try out is range trading. Just as the name implies, here you will be tracking your trade setups based on the range within which the currency prices are moving. You will consider the range to spot an uptrend or downtrend in a currency pair and place trades in accordance with it. You go long in a rising trend and go short when the price is falling with a downtrend. It is one of those strategies that anyone can learn irrespective of their knowledge and skill level.
Momentum trading is another trend based strategy but here traders need to consider the momentum and strength of a particular trend. You need to assess the strength of a trend before opening a position. This will save you from following weak trends that would start fading and reversing even before your target levels are hit. You will need to use some tools like momentum indicators and oscillators for executing this strategy with perfection.
So, these were some of the basic level forex trading strategies that you can explore as a beginner. These strategies will also call for some learning but they are less ambiguous in comparison to other complex ones. One tip we can give you here is starting with demo account practice and always backtest your strategy before going live. Make sure the strategy can be the right fit for your trading style and would take you closer to your goals and targets as an individual trader. No forex trading strategy can guarantee profitable results all the time as they would totally depend on the trader’s skill level and the real time market situation when you deploy the strategy.