5 Essential Forex Trading Strategies For Beginners

They need a good trading program that is far less time consuming and overwhelming for them to get started. This will generate some good results for the new trader so that they can continue trading forex successfully with everyone else.

The key to a good FX trading strategy is that it needs to have minimum lagging indicators, and need to be easier to understand for a novice trader. Here are three of the most common approaches for a beginner: Trend trading, Range trading and Breakout trading.

Trend Trading

It is a strategy known as trend trading, where we are looking to follow the direction of the momentum in the market, and trade in the direction of rising markets or falling markets and position our trades in the direction of the move and ride the force in the market. It is probably one of the easiest ways that traders new to the markets can make money with so little cost or effort to maintain or run the strategy.

Traders can spot (or anticipate) trends in their charts using moving averages, trendlines, support and resistance, and technical indicators. Once the trend is detected, traders can use stop loss and take profit orders to place their entry orders and limit their risk, while maximising their returns.

Detecting any trend is vital for smart trading decisions. For example, you can buy or go short on any currency pair when prices rise and sell or even go short in downward trend; just remember that prices can move against you due to an infinite range of factor such as politics, or central banks, policy announcements.

Range Trading

Range trading is an easy and effective method consisting of waiting for predictable price movements, within predetermined boundaries, and making money off them using tools like trend lines, oscillators and moving averages as support and resistance and targets and stops, all while keeping risk in check.

The objectives of range traders are to sell when price approaches the top of a range and to buy when price action nears the bottom of a range. They also have to watch for a breakout, when the price moves beyond the top or bottom of the range, which presents the opportunity to profit as the price oscillates between the range’s resistance and support points. Breakouts could also occur, here indicating that the trend is continuing with an exit out of a range.

But to ensure profitability, range traders also have to locate their stop loss level below the level of support, when buying, and above that of resistance, when selling. Maintain an appropriate risk-reward ratio, as prices can move either way for a specified duration; so be patient; range-bound opportunities take more time to find than others.

Breakout Trading

The most basic and practical way to make money on the markets is known as breakout trading – finding trends in the currency markets and entering when they emerge. Breakout trading offers a straightforward, uncomplicated method to profit from market moves; it doesn’t require a lot of technical expertise or experience to be a breakout trader but that doesn’t mean they shouldn’t be taken seriously; it just means that when it forms you have to have an actionable trading plan ready and treat it with respect and make sure that you take the trade as soon as it occurs.

Breakout traders have a variety of time frames with which to trade breakouts; nevertheless breakouts over a longer time frame are more likely to signal a potential trade, as shorter time frames can have false breakouts.

Wait for confirmation of the breakout (by price, volume or time) before you get into the trade, then exit by price or time if it becomes no longer profitable It will reduce the chance of you getting into a breakout at a bad time and make it easier to walk away and cut your losses when the trade turns bad – something that will keep your loss to a minimum in the event of a bad position, yet allow you to ride a new trend to a decent winning trade.

Carry Trade

As it is the most active market in the world, you can imagine that professional forex traders have developed more than a few different strategies. Learning which approach suits your goals and understanding the basics of it are both equally important.

Carry trading is a strategy where you can profit from interest rate differences between the base and quote currencies of a given forex pair. In other words, the higher the potential interest rates of your base currency drop to the quote currency, the more valuable the currency pair you’re trading will become. This is especially true when a central bank has just raised or seriously considers raising rates.

Indeed, carry trade is a high-risk strategy, only suited to more experienced traders with ample capital, and using leverage only serves to amplify any losses you do incur.

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