The Forex market is the largest financial market in terms of trading volume, so there are a lot of trading strategies. But what are some of the best forex strategies for beginners?
Here’s a list of six of the best forex trading strategies for beginners:
Trend-following is one of the easiest strategies that many beginners start with. It requires traders to trade in the direction of the trend. Once a trader identifies the trend’s direction, he/she would look to open positions depending on the trend’s direction.
A key point to remember here is that market trends can be short, medium, or long. Traders must decide their trading strategies based on the trend’s length. For example, a forex scalper may follow the direction of the trend for shorter periods.
As the market depends on many factors, a trend can change in an instance. For these situations, traders may wish to apply different forms of technical analysis to filter trades. Traders can look for chart patterns or apply indicators to try and maximize their trading potential.
2. Pin bar Trading Strategy
The pin bar is a simple forex strategy for beginners. It’s effortless to identify and doesn’t require much hassle on the trader’s part.
The pin bar is a reversal strategy. To apply the pin bar strategy, traders would draw support and resistance levels. When the price breaks the resistance level, it is an indication of upward momentum, and bullish pin bars will appear. Conversely, when the price breaks the support level, it signals downward momentum, and bearish pin bars will occur.
3. Inside bar Trading Strategy
Another forex trading strategy for beginners is the inside bar. It is the opposite of the pin bar strategy. It is a continuation pattern; this means a trader would take positions according to the trend’s direction.
To identify the pattern, traders can locate two bars; one larger and the other one smaller. The larger one is called the mother bar.
If both bars appear in an uptrend, traders might look to take buy positions, as it’s a signal of continuation pattern. Conversely, if both bars form in a downtrend, traders may look to take sell positions.
4. Moving Average Crossover
Moving averages often indicate buy and sell signals and are easy to implement on the chart. With the help of moving averages, a trader can find out the direction of the current trend.
One of the most common ways to use moving averages is to look for the crossovers of two moving averages. One of these moving averages is shorter, like a 10-day moving average and the other one is longer, like a 100-day moving average. If the shorter moving average crosses above, the longer one, it is a buy signal. It is also known as the golden cross. Contrarily, if the shorter moving average crosses below, the longer one, it is a sell signal. It is also called the death cross.
5. Locating Support and Resistance Levels
Finding support and resistance levels is a simple way to take trading positions. If the price is near the resistance levels, it’s an indication that a downtrend may follow. So, traders could start to consider sell positions. And, if the price is near the support level, it may be a signal that an uptrend will follow. So, some traders may look to consider buy positions.
6. Trend Lines
One of the stress-free trading strategies is to draw trendlines on the chart. To apply this strategy, draw a straight line connecting two points. If there is an uptrend, connect two low points, and if it’s a downtrend, connect two high points. When the price breaks these trendlines, it’s an indication of a changing trend.
While all of the above mentioned trading strategies can be used by beginners, traders should apply trading strategies according to their own preferred technical and fundamental analysis.
Becoming a successful forex trader can take many years of practice. It is not easy to make a living from forex trading in my opinion. It will require immense trading discipline, good money management, and a bullet proof trading plan.
The methods of trading forex that are outlined within this article are just ideas. You should trade forex in a way that suits your own individual style, needs and goals.
If you would like to practice forex trading online, you can open an account with a forex broker and download a trading platform completely free of charge. If you are looking for a forex broker, you may wish to view my best forex brokers for some inspiration.