Many forex trading strategies are quite complex. They all have a very high learning curve for people just starting their journey in the forex market. Easy and simple to learn forex trading strategies are a much better choice. This is because the easier the strategy, the simpler it will be to learn about all the concepts concerning it. There will be a lot of time to add more complicated steps after a person has learned the basics of trading in the forex market. People can get success with both complicated and easy strategies in the market. But they should always remember to keep something that works well in their toolbox. We will share forex trading strategies to help you do just that.
It is vital to select a correct time frame suitable for the style of trading preferred by the beginner. There is a big difference between looking at a weekly and a ten-minute chart when planning your trades. If the person wants to become a scalper in the market, a person looking to gain from market moves that are smaller, they should keep their focus on the lower time frames. Contrastingly, people interested in swing trading will use the two-hour chart and a daily chart to get profitable trading chances. So, before they select the right trading strategy, you must find out how long you prefer to stay in a single trade. The differing periods lead to varying forex trading strategies.
Number of Trading Chances
When seeking the optimal forex trading strategies, the trader has to find out how soon they want to trade in the market. Suppose you are a person who is keen to open several positions in the market. In that case, you should try to find out a trading strategy that supports scalping. People who want to spend more of their resources and time examining the fundamental factors and the macroeconomic reports will not spend much time looking at the charts. Their forex trading strategies will be based on larger positions and bigger time frames.
Getting the right size of the trade is also very crucial. Forex trading strategies that are good need the person to find out about their risk taking abilities. If they risk more than they can afford, it can become very troublesome for them and lead to high losses. A good piece of advice regarding this is to choose a limit for the risk you are willing to take on each trade. Usually, traders set a limit of under two percent on their trades. This means they are not willing to risk more than two percent of their account on one trade.
Simple Forex Trading Strategies
A couple of the forex trading strategies here are very similar because they are going to follow the trends in the market. One strategy is going to try to profit from differentials in the interest rate rather than guessing the direction of the market. Many people who are new to the markets are not aware of trends. A trend is the habit of the market to continue its movement in an overall direction. A system that follows the trend tries to give sell and purchase signs that are in line with the creation of the new trends. Several methods have been constructed to determine when a trend ends or starts. Several forex trading strategies function in similar ways. Many traders have a great track record when they utilize such trading systems.
A few of the disadvantages of these strategies are the conditions that show a trend is going to start do not happen so frequently. Also, the bigger trends are not so frequent. These forex trading strategies may also be difficult for traders to stick with. This means the trading strategies can also generate quite a number of losing trades. But the losses are offset by infrequent but bigger winning trades. This is not a very easy thing to follow in practice. Also, if the trend breaks down, a substantial amount of your profits may be sucked away.
Forex Trading Strategies: Breakout
The signal to buy happens when the price breaks out above the high of fifteen to twenty-five days. The sell signal happens when the price breaks out below the fifteen to twenty-five days. This is quite simple. But there can still be some disadvantages. The main one is that the new highs may not cause a new uptrend. Also, the new lows may not cause a new downtrend. So, there are going to be a lot of false signals. A stop-loss can assist in solving this issue. If you want to keep things simple, you must follow easy rules for exiting your trades. You can go with a time-based approach. The trades have to exit the position after a number of days have passed. This exit does not let things get risky for the trader when the trend begins to go the other way. Also, when the trader has entered a trade, he should try to hold it for 90 days and then exit.
Moving Average Crossover
This strategy for beginners utilizes the simple moving average. The simple moving average is a lagging indicator that utilizes older price information than most other strategies. It moves a lot more slowly than the current market price. The lengthier the period over which it is averaged, the slower it tends to move. Also, the shorter average is used in sync with the lengthier average. For this strategy, traders can utilize the twenty-day moving average as the shorter average, and the longer one can be two hundred days. When the shorter average crosses the longer one, it shows that there has been a change in the trend. When the shorter average moves above the longer one, it points out that the newer prices are greater than the older one. This shows that there is a bullish trend and indicates the buy signal.
When the short average goes below the longer average, it shows a bearish trend. This is the sell signal. It is not just used to get trading signals, but it also gives an overall confirmation of the trends.
This is another of the great forex trading strategies. It is a kind of trade utilized by a wide variety of professionals. Thus, it is not just a strategy for beginners. Also, it is quite simple to understand and place on your own. The basis of the trade is to get profit from the difference in the yield between currencies. To find out more about this, we can take the example of a person who converts currencies. A trader may get some Japanese Yen. Since the benchmark of the interest rate in Japan is very low, touching nearly zero at most points in time, the cost of having this debt is next to nothing. The person then exchanges the Yen with dollars and invests the money into any government bond, which will give him some interest. The interest received will be higher than the cost required to finance the debt of Yen.
But there is also a disadvantage. The risk of currency is inherently present in the trade. If the Yen gets to a high mark against the Canadian dollar, the person can lose his money. The same rules apply when trading in the forex market. But it gives the convenience of placing it all in a single trade. Suppose a person purchases a currency pair where the base currency has a high-interest rate in relation to the quote currency. In that case, the person will get funds from the positive swap rate. Your overall friend in this strategy is inertia. You are seeking a low volatility forex pair.
You may have been trading in the forex market for many years or just starting out. But there are a lot of forex trading strategies that you can have in your toolbox. The strategies that we have provided have the ability to become staples in your trading journey. So what are you waiting for?