5 Effective Forex Trading Strategies for Beginners
Using effective forex trading strategies can help prevent beginners from making costly mistakes in the market.
It is because there are many variables which could affect the price fluctuations in the market.
There are some forex trading simple strategies available for beginners to earn some money. So, let us dive in to know more.
Forex trading strategies
Among the most popular different forex trading strategies for beginners are:
- Breakout trading
- Moving average
- Carry trade
- Trade on news
- Trend trading
These are very useful strategies for traders as they provide them with wider and deeper insight into the forex trading market.
Be cautious, though. Before applying any strategy to your live trading, you can take a risk-free experiment by using a demo account.
Traders will look for strong momentum and the actual breakout is the signal to enter the position and profit from the market movement that follows.
One of the most basic forex trading strategies is breakout trading. This makes it a wonderful choice for beginners.
In the world of forex trading, the breakout is any price movement outside a known support and resistance level.
When the price increases above the resistance area, or drops below the support areas, this means that breakouts have occured.
So, a breakout strategy aims to enter a trade as soon as the price manages to break out of its range.
This strategy offers the start of increasing market volatility. By waiting for the break in the price levels, you can apply volatility to your advantage.
Simply known as MA, it is among the simplest technical indicators in the market. The main aim of this indicator is to smoothen out the price data in the market by creating a constantly updated average price.
Averages can be taken over different times, anything from 20 minutes, up to several months. They are very popular and can be used in any time frame.
Because of this, it can be very useful for both long-term as well as short-term traders.
This third strategy is a very popular strategy among forex traders. Those who are using this strategy are taking advantage of the interest rate differentials between countries.
Based on the size of his or her position, a trader would go buy a currency with a high interest rate and sell a currency with a low interest rate.
The main aim of the carry traders is to make profits from the difference between the interest rates.
This is because any changes in interest rates directly impacts the two different traded currencies that make up a currency pair.
Although it is very popular, it can be quite risky to be a carry trader. Carry trades do well in a bullish market when traders are looking at high risk trading.
Trade on news
Another very crucial strategy in the forex trading market is trading on news or fundamental analysis.
There are a number of forex traders who trade in the market based on the different kinds of events across the globe.
Fundamental analysis determines whether a certain currency is undervalued or overvalued. Thus this helps traders to understand the direction the market could take.
Some of the most vital factors that fundamental analysis examine are the GDP of a country, Consumer Price Index (CPI), inflation rates, unemployment rates, and etc.
Nevertheless, there are some traders who prefer to engage both technical and fundamental analysis in combination.
The fifth strategy is trend trading. This strategy forecasts following various types of trends in the market. This is very easy for beginners to understand and follow.
Traders using this technique recognize upward and downward trends in the market to ascertain the market direction could head towards.
They usually use numerous types of technical indicators or tools, such as Moving Averages (MACD), Relative Strength Index (RSI), stochastics and so on to identify the market trends more accurately.
Which one is the best?
The list of forex trading strategies explained above can be very helpful for beginner forex traders.
While some traders prefer to use only one of these trading indicators and strategies, there are others who prefer to use them at the same time.
Fundamental analysis offers traders a detailed insight into the economic and political events that could influence the currency prices.
On the other hand, technical analysis can help you identify the market trends depending on the historical price movements in the market.
All those methods can enable you to better assess the possible direction the market could take.
In a Nutshell
As a new forex trader, you will be amazed to find out there is a huge volume of effective forex trading strategies for beginners.
It is always better to start with the simplest ones and then add to it as you progress in knowledge and experience in the trade.
Choose from several strategies designed by professional traders to benefit you as a new trader. Sign up to learn more with Tradehall to kickstart your forex trading journey.