Are you new to forex trading and want to learn some basic yet efficient trading strategies? You’ve come to the right place.
We’ll go through seven simple trading strategies for beginners in this article. Each one is simple to learn and great for those who are still honing their talents.
Using these methods on a broker like FXTM will help you avoid years of frustration trying to figure out which trading strategy to use. FXTM seeks to provide its clients with one of the greatest user experiences in the market, according to some FXTM trading reviews.
This fxtm review shows that FXTM is a reputable broker with numerous regulations. The platform is user-friendly, and FXTM offers one of the industry’s lowest deposit requirements, minimal CFD charges, and platforms that suit all sorts of traders.
The 7 money-making strategies:
Trading with a breakout
Breakout trading is one of the most basic forex trading strategies, making it an excellent alternative for newcomers. Let’s define the term “breakout” as we look at how it works.
Simply put, a “breakout” is any price movement that occurs outside of a clearly defined support or resistance zone. Breakouts can happen when prices rise over resistance levels, which are referred to as “bullish” breakout patterns. They can also occur when prices fall below support levels, which is referred to as a “bearish” breakout pattern.
Breakout trading is a crucial strategy since breakouts frequently indicate the beginning of rising market volatility. We benefit from volatility by joining a new trend as it begins and by waiting for a break in a price level.
The purpose of breakout trades is to enter the market when the price makes a breakout move and then ride the trade until volatility subsides.
But when should you get into the market?
When a support or resistance level is breached, some forex experts recommend jumping in. Others advise waiting just long enough to confirm whether the breakout is a legitimate up or downtrend.
- Crossover of Moving Averages
A moving average (MA) is a simple technical analysis and indicator tool that provides smooth-out price data by calculating an average price that is regularly updated. That average can be calculated over a variety of time periods, including ten minutes, five days, twenty weeks, or any other timeframe a trader desires.
The Moving average strategies are widely used and can be customized to any time frame, making them suitable for both long-term and short-term investors.
One of the most common reasons for creating a moving average is to determine trend direction as well as support and resistance levels.
- Fundamental Analysis
Traders use fundamental analysis to determine if a currency is undervalued or overvalued by looking at its economic fundamentals. They also use the data to forecast how the currency’s value will change in relation to other currencies in the future.
Fundamental analysis can be difficult to understand since it involves many different aspects of a country’s economic data that can be used to forecast future trade and investment trends. It can be made simpler by focusing on a few key signs.
CPI, GDP, Retail sales, industrial production, inflation, purchasing managers index data, housing statistics, and other indicators can all have an impact on a country’s economy and its currency.
- Carry trading
Carry trading is a form of FX trading in which dealers attempt to profit on interest rate differentials across countries. It’s crucial to remember that, while popular, it can also be risky.
This approach works because currencies purchased and kept overnight pay the interbank interest rate to a trader (of the country the currency was bought). A carry trader “borrows” money from a currency with a low-interest rate in order to buy a currency with a higher rate.
A trader who employs this method hopes to profit from the rate differential, which can be significant based on the amount of leverage used.
Carry trades are one of the most popular trading methods in the forex market, but they are risky because they are frequently highly leveraged and overcrowded.
Because the interest rate margins on these currency pairs are so wide, popular trading pairs include the Australian dollar/Japanese yen and the New Zealand dollar/Japanese yen.
If you’re into math, you can compute the daily interest from a carry trade as follows: [IR (long currency) – IR (short currency)] = daily interest / notional value multiplied by 365.
- Trading based on momentum
Strong price fluctuations in one direction are a favorable sign that a price trend will continue in that direction for some time, according to momentum indicators and momentum trading.
Similarly, weakening movements suggest that a trend has lost traction and is on the verge of reversing.
Price and volume may be considered in momentum techniques, which frequently include visual analytical tools such as oscillators and candlestick charts.
- Trend trading
Another popular and often used forex trading approach is trend trading. Beginners will find it simple to grasp and follow.
The method entails determining if a currency price movement is trending upward or downward and then selecting trade entry and exit positions. The relative strength of the trend, as well as the positioning of the currency’s price inside the trend, are used to calculate these points.
Relative strength indicators, volume measurements, Moving averages, directional indices, and stochastics are among the techniques used by trend traders to assess trends.
- Range Trading
Range trading is a basic and popular approach based on the premise that prices tend to stay in a consistent and predictable range over time. It works best in markets with stable and consistent economies, as well as currencies that aren’t frequently subjected to unexpected news.
Range traders rely on just being able to buy and sell at expected highs and lows of resistance and support, often several times during one or more trading sessions.
The relative strength index, the commodities channel index, and stochastics are some of the same tools that trend traders employ to find advantageous trade entry and exit levels.