3 Strategies Perfect For New Forex Traders
3 Strategies Perfect For New Forex Traders
Forex trading is not easy, but ultimately it can be very rewarding. In our piece on "Succeeding at Forex Trading", we mentioned that you just need to start with the right foundation. This includes a great trading platform, a consistent trading plan, — and knowledge. One of the most important things you should do as a forex trader is to keep learning. The world of forex keeps evolving, and so should your strategies. More importantly, not every strategy fits every individual’s trading style. This is where FXCM believes a forex trading demo account can help. These accounts accurately simulate live market conditions so you can practice without putting up any actual capital. This way, you can test various trading strategies, pick the ones that work best for you, discard those that don’t — and try even more strategies so you can build up your repertoire. As a beginner, you may want to start this testing process with strategies that are relatively easy to understand. Below are a few that are perfect for new forex traders like yourself.
Range trading
If you’re looking for a less technical way to analyze your trades, this is it. Price movements usually stay within a specific range during a certain period of time. All you need to do is enter your trade when prices enter that range and exit when those prices leave. However, it’s important to note that this strategy usually works best when you’re watching currencies tied to stable and relatively predictable economies. US News has a list of such economies, and leading the list are Germany, Canada, and Switzerland. In the same vein, it’s advisable not to use range trading if you deal with currencies tied to countries that are the most likely to experience sudden and adverse market events.
Trend-following
This is another strategy that’s easy to understand from the get-go. Simply follow a trend related to a certain asset and determine possible trade opportunities that are tied to it. Investopedia explains that trend-following generally involves entering a long position when an asset trends upwards (hitting higher highs and higher lows) and entering a short position when it trends downwards (hitting lower highs and lower lows). This strategy is quite flexible. You can follow a trend within a single day, which is known as intraday trend trading. You can also try position trading, which is when you hold a long position throughout an asset’s entire uptrend — whether that takes days, weeks, or months — and subsequently sell once a downtrend begins.
Price action trading
This strategy involves watching price actions and acting accordingly. If you’re more of a short-term trader, this may suit you best. You can break everything down into three main steps. First, draw key support and resistance levels. Next — and patience is critical here — wait until the day’s session closes. From here, you can finally start looking out for buy and sell signals. Demand increases if enough buyers push a price action above key support levels, while the opposite denotes a decrease. By only focusing on price action, you can do away with technical indicators, keep a clean chart, and more easily keep track of your trades. Though it’s challenging to start trading forex, the right strategies can make it a breeze. With the above beginner strategies and a good demo trading account by your side, it’s only a matter of time before you fully flesh out your trading style and make the most out of your trades in forex.