The forex market is a huge market with plenty of trading opportunities. Oftentimes traders look for simple yet effective trading approaches to trade forex online. There are a lot of forex trading strategies to choose from, but what are some of the simplest trading strategies? This article will look at four simple forex strategies for beginners by introducing some simple Forex trading strategies.
1. Breakout Trading
Breakout trading is one of the simple forex trading strategies for beginners and professional traders. It is quite easy to follow. All a trader needs to do is to follow the direction of the trend and monitor highs and lows. When the breakout occurs, a trader may start to look for trading positions. A breakout can be defined as a region making several highs and lows before finally moving in the trend direction.
Many traders think that in search of this breakout region, they might not predict market pullbacks. However, being aware of pullbacks when there is not a breakout can give other trading signals or help avoid false breakouts.
Traders need to remember these points:
- Identify long-term breakouts
- Use momentum oscillators to find out the exact entry and exit points.
- Locate key market moves.
Normally, the breakout strategy is used on more significant levels of support and resistance. However, a trader can use this strategy on any currency pair and time frame that they wish.
Forex scalping is one of the most popular trading strategies, and many traders try to implement it. Scalping involves entering and exiting trading positions multiple times a day. A scalper enters the trade in search of small profits on a frequent basis.
In order to implement scalping, a trader would usually do a few things:
- Plan an entry and exit strategy
- Enter the trade whenever there is an opportunity and exit according to the strategy
- Apply the strategy on shorter timeframes like 1-minute and 5-minute charts.
However, scalping requires expertise and can take years to master.
3. Carry trading
Carry trading is yet another powerful and simple forex trading strategy. It involves buying a high profiting currency and funding it with a low profiting currency. The principle of carry trading is “buy low, sell high.”
Some of the most popular forex pairs involving carry trading are AUD/JPY and NZD/JPY. This is because the interest rates of these currencies are very high.
To apply carry trading, the first step a trader needs to take is to find out which currency provides a high yield and which one offers a low yield. A trader would then consider to apply the principle of buying low and selling high.
Carry trading is often used when there is low volatility, as traders are willing to take more risks. Not just individual traders, large financial institutions conduct carry trading also. They are amongst those that get the most out of carry trading because of lower interest rates. And, when the market has low volatility, big institutions may look to take advantage of this.
4. Swing trading
Swing trading can involve predicting overbought and oversold market conditions. The overbought condition occurs when there is strong buying pressure. Conversely, oversold conditions emerge when there is sharp selling pressure.
These conditions represent abnormality in the markets. This is where swing trading comes into play. Swing traders identify these levels by using trendlines or one of the momentum oscillators like the RSI or Stochastics. Then, they could look for market volatility with a technical indicator like the Volatility Index (VIX), and then enter the trade at the support or resistance levels if they wish to do so.
One of the advantages of swing trading is that it works fine on longer timeframes and shorter timeframes.
Simple Forex Strategy Conclusion
The Forex market (Foreign Exchange Market or FX) is hugely liquid, with a vast number of participants. It is also a well-established market. As you might expect, the combination of popularity and time has resulted in professional FX traders devising countless trading strategies.
As a day trading beginner who might simply be searching for beginner’s trading guides on how to learn to trade Forex, or even an intermediate FX trader seeking some useful trading strategy guides to improve their knowledge and skills, the sheer volume of trading techniques available can be daunting and confusing.
When you’re new to forex trading, you’ll have to do quite a bit of research about how the FX market works. Forex trading basics include understanding currency pairs, deciding how to trade FX, creating your strategy and managing your risk. You’ll also need to establish your trading style – be it day trading, swing trading scalping. There’s also position trading, but this style is more suited to long-term trading, not forex.
Being a beginner in forex trading doesn’t necessarily mean you’re just starting out, though. You may have already placed a few trades, but now need a tested forex trading strategy to help you along. Some day trading strategies are very complicated, with a steep learning curve. So Forex beginners may find it better to start with a simple and easy Forex strategy.
After all, the simpler the strategy, the easier it is to understand the underlying concepts. There will be plenty of time to add complex actions after you have mastered the basics. Regardless of whether you adopt a simple or complex strategy, remember that your overarching mantra should always be to use what works.
New traders are generally unable to devote large amounts of time to monitoring developments. For these newcomers to Forex, simple strategies offer an effective but low-maintenance approach.
All of the simple forex strategies mentioned above can be implemented for all types of traders. It is important to learn as much as possible about all types of trading strategies, both simple forex strategies and complex ones.
Self-confessed Forex Geek spending my days researching and testing everything forex related. I have many years of experience in the forex industry having reviewed thousands of forex robots, brokers, strategies, courses and more. I share my knowledge with you for free to help you learn more about the crazy world of forex trading! Read more about me.