The forex market has a wide range of trading strategies, but which are the best strategies for starters? This is the question commonly asked by traders who are just starting out. If you are one of these novice traders, this article will be really helpful to you.
It is commonly said that a trader who is starting out is actually closer to becoming successful than one who has been in the trading sector several years and has been trading unsuccessfully. This is simply because a newbie hasn’t had enough time to create bad trading habits. As a beginner, consider the following strategies discussed below.
Three Forex Trading Strategies for Beginners
- Carry trade
Not only beginners but also professionals can use this strategy. It is not only easy to understand, but it is also easy to implement. Carry trade strategy is commonly used by people involved in the currency conversion industry. If you want to learn more about Forex CFDs, this strategy can be the most appropriate for you.
The essence of this strategy is to allow a trader to make a profit from the differences in outcomes between two currencies. If you are planning to specialize in this line of business, this strategy can help you achieve a lot.
Sometimes, markets range between bands of resistance and support. This is commonly referred to as a consolidation. A market can move past the boundaries of its consolidation. A breakout occurs when the market moves past these boundaries to either new lows or highs. For a new market trend to happen, a breakout should take place first.
A new high can be an indication that an upward trend has just begun. On the other hand, a new low might be an indication that a downward trend might be starting. As a beginner, it is important to know how to tune this breakthrough strategy. This will help you adjust different factors appropriately to ensure your business moves toward the right direction.
- Moving average crossover
This is another important forex strategy for starters. It applies SMA (Simple Moving Average). This is actually a lagging indicator that applies older price data and tends to move slower compared to the current market price. When the SMA falls on an average over a long period of time, it is likely to move slowly.
If the short SMA goes above the longer SMA, then the newer prices are higher compared to the older prices. Moving averages are highly used when it comes to the generation of trading signals and during confirmations of the overall trend. To make your breakout signals more effective, you can combine the two strategies with the help of the confirmatory aspect of your SMA.
With the combined strategy, you can actually discard breakout signals, which do not go in line with the overall trend indicated by your moving average.
For instance, if you acquire a buy signal from your breakout, find out whether the short SMA is on top of the long simple moving average. If it is, consider placing your trade.
Forex trading strategies provided above can be really helpful to you especially if you are a beginner. Moreover, it is always important to test a strategy before you start following it.