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Simple Forex Trading Strategies That Work For Beginners in 2020
Are you new to forex trading? Confused about the many strategies that are listed on the Internet? How do you find a strategy that will work for you? In this article, we will discuss several strategies that beginners can use to simplify their forex trading experience.
Simple Forex Strategy No Indicators
Indicators are indeed helpful tools when it comes to forex trading. For experienced traders who are already proficient, they are an added value to their trading systems. However, beginners might get overwhelmed by incorporating several indicators in their strategy. Granted, they could use one or two indicators to help them understand the market. But why complicate your trading system when you can make it simple?
Don’t overcomplicate your trading system and just do the K.I.S.S. Method!
K.I.S.S. stands for “Keep It Simple Stupid” which is a well-known acronym in many industries that can also be applied in trading. In forex trading, keeping your trading strategy simple is the best way to find the right signals to buy and sell. Many traders often believe that using different trading methods would give them the most profitable trade or just make them think that their trading system is improving. That is not always the case, especially for beginner forex traders. Sometimes, keeping it simple is the most efficient way to make a profit.
When it comes to forex trading, keeping your trading strategy simple means eliminating indicators from it. This makes it less confusing for traders and gives them a clear head during trading hours. Some call this “Naked Forex Trading.” In this method, forex trading is made possible without the use of indicators. They would only need to learn how to read the price action and chart patterns to be successful in this particular market. Price action refers to the movement of prices over time and helps traders identify the direction the market will move.
On the other hand, chart patterns are essential in finding great trades. One of the first skills that a trader should have is reading charts because this technique allows you to read the behavior of the market. It shows the trends that emerge in different market phases which are very important in naked trading.
In naked trading, a trader trades based on the current price in the current situation of the market. This method makes trading more straightforward and more precise. Not everyone may want to stick to naked trading in the future, but beginner forex traders should try it at least once. In order to master this concept, the best way to start is to practice implementing price action strategies and chart reading skills on a demo account for three months. Keep in mind that these elements should be incorporated in your trading strategy. It might take a while to find the right formula, but with enough practice and discipline, you will be naked trading in no time.
What Is The Best Strategy For Forex Trading?
Having a trading strategy is an essential aspect of becoming a successful trader. Before you can trade forex, you need to have an effective system in place that will make your trading more efficient and determine the best time to buy or sell a currency pair.
There is no single trading strategy that suits every trader. Trading strategies can be short-term or long-term, depending on the trader’s personality and goals. One approach might work for one but might not work for another. Here are some of the most commonly used forex trading strategies:
- Position trading. Position trading is a long-term strategy that requires adequate knowledge about fundamental analysis. Long-term traders usually use daily charts to follow trends and hold trades for weeks or months. People who use this strategy should have the patience and discipline to wait for the right time to take advantage of significant price movements.
- Swing trading. In this strategy, forex traders hold trades for days and aim to make a profit from a single move in the market. Traders who use this strategy also have more trading opportunities.
- Scalping. Scalping is a very short-term strategy that aims to make small profits by holding trades for just a few minutes, opening and closing numerous positions in a day. It presents the most opportunities for traders, although it is time-consuming and has a high financial cost.
- Day trading. Day trading is a short-term strategy wherein trades are held for minutes or hours. Traders who use this approach aim to close trades at the end of the day to avoid being affected by any significant moves in the market overnight. The focus of this strategy is the volatility of the market during the day.
- Price action trading. This strategy can be used short-term or long-term and aim to make a profit by taking advantage of price patterns. It can also be used alone or with the use of indicators and other technical analysis tools such as Fibonacci retracement and oscillators.
Learning and understanding the different trading strategies will help you in discovering the suitable one for your trading system. However, do not expect to gain results instantly. The best way to find the right approach is to test and practice every single one of them. When choosing the strategy, you should consider the following:
- Risk-reward ratio
- Time investment and trading timeframe
- Trading frequency
Trading with a demo account for one to two months will also help in grasping the different strategies and allows you to trade without worrying about the risks.
Which Timeframe Is Best For Forex Trading?
The best time frame for forex trading depends on the trader’s chosen strategy. Beginner traders usually make a mistake to use a timeframe that does not fit their personality, resulting in failure. Traders should feel comfortable during their trading time so they would not feel pressured or frustrated when things do not go their way. It is important that the timeframe you are working on feels natural for you.
Time charts can be broken down into three categories: long-term, medium-term, and short-term. For long-term traders such as position traders, they use daily or weekly time charts to have a longer perspective of the market. Since this type of trader usually has few transactions in weeks or months, the longer duration gives them more time to think about each trade. With that said, long-term traders need to have bigger accounts since bigger stops are required.
Medium-term traders such as swing traders get the benefit of long-term and short-term charts. They use daily charts to identify the trend or market direction and then reduce their time frame to four-hour charts to look for entry points. Swing traders tend to look at the charts several times in a day in hopes to spot big fluctuations in the market.
Short-term traders such as day traders and scalpers use short time frames to find the best entry points. These traders have lots of opportunities throughout the day and since they do not hold positions overnight, they need to limit their perspective into just a few hours a day. Depending on the time day traders allot for trading, they can use tick charts, one-minute, 15-minute charts, or hourly charts. Traders who also do transactions in a short time do not need a huge amount of capital and have tighter stop losses.
Beginner traders are recommended to use longer time frames when they first start because the volatility of the market can get intense in shorter time frames. It can cause panic for first-time traders so it is better to stick to longer time frames until such time that they have gained experience and be more comfortable in making quick decisions.
How Long Do Forex Trends Last?
Identifying trends is vital for the success of forex traders. Trends display the general direction of the market and used by traders to determine the best place to position their trades. Trends can be long-term or short-term depending on fundamental influences. They can also be categorized into three:
- Horizontal or Sideways
The length of these trends can also be categorized into three: long-term, intermediate, and short-term. A long-term or secular trend can last for years, an intermediate or primary trend can last for months up to a year, and a short-term trend can last for a few weeks or a month. The length of trends cannot be predicted and traders will never know the exact time that the trend will end until the market direction changes. Although, traders can speculate the probability that there would be changes in the market that can reverse the trend by looking at moving averages, support and resistance levels, and trendline breaks.
Can You Learn Forex By Yourself?
The trading industry is highly competitive especially for a beginner. But can you learn the ins and outs of trading by yourself? Yes, it is possible as you are willing to dedicate your time for it. It is going to be a daunting task since you have to do extensive research about the basics and technicalities of trading. There is also a great chance that you will not be getting things right in the beginning.
Trading can be frustrating but with a lot of practice, you will gain experience along the way. The challenges you would encounter are going to help you grow as a trader. Learning is never-ending when it comes to trading so better make sure that you do not forget the lessons each experience will teach you.
Forex Trading Strategies For Beginners – Step By Step
Are you just starting forex trading and have a hard time coming up with a good trading strategy? Here is a step-by-step guide on how to design your own:
1. What kind of forex trader are you? Know yourself as a trader. What are your strengths and weaknesses? How much time are you willing to commit to trading? These questions help in determining the timeframe you will be using.
2. Identify your goals. Your strategy should be aligned with your goals. How much are you expecting to earn from your trades? Your goals should be realistic and you should also factor in your capital.
3. Define your risk. As you think of how much you are expecting to earn from your trades, you should also think of how much are you willing to lose? Risk and money management are very important when it comes to developing your strategy.
4. Select and understand a currency pair. When you pick a currency pair, you have to test it on your preferred timeframe and observe its behavior. Once you understand it, you should read more about that currency pair and its fundamentals.
5. Choose indicators that identify and confirm trends. Since trends are important to forex trading, you have to choose the best indicators or tools that will help you determine the best entry and exit points for the trade.
6. Test your strategy and stick to your rules. Practicing your strategy is a great way to develop it. Also, setting limits is a great way to instill discipline as you try your trading strategy. It is important that you always follow your own rules in order for your strategy to be successful.
Best Forex Strategy For Consistent Profits
A trading strategy is necessary for a successful trading. Traders have their own system that helps them take advantage of the forex market. There are different forex trading strategies that use different techniques but is there a single strategy that gives the most profit? The answer is no. Any strategy can be profitable but it will take a lot of practice. Results of these strategies may also differ from one trader to another. Because traders have different personalities, not every strategy will fit their goals and system.
Some of the most popular forex trading strategies that traders believe are the most profitable are:
- Bollinger bounce strategy
- Positional trading strategy
- Support and resistance trading strategy
- Fibonacci retracement strategy
- Trend trading strategy
Again, there is no single strategy that makes the most profit. Any of these forex trading strategies can be profitable, provided that the trader has practiced and improved it until it seamlessly works with your own system.
Forex Trading Strategies
A forex trading strategy allows a trader to identify the best time to place a trade. For beginners, it can be difficult to identify which one suits them because there are many strategies presented. The best way to find a strategy that fits your trading personality is to try them all.
Very Easy And Profitable Trading Strategy Mt4
MT4 or MetaTrader 4 is a trading platform which traders use to view real-time currency prices, open and close positions, and get technical and fundamental analysis. With MT4, you can customize which indicators to use to aid your trading strategy. A simple strategy that beginners can use is the breakout strategy. In this strategy, you are looking for price breakouts that can possibly lead to a new trend. But there are times that breakouts will cause trends and this strategy will help you determine how to react to if these situations occur. MT4 has a variety of tools and indicators that alerts the trader when a price breaks support or resistance level.
50 Pips A Day Forex Strategy
The 50 Pips A Day forex strategy is an ideal strategy for beginners because it does not use complex indicators. It is a simple trading strategy that uses major currency pairs such as GBPUSD and EURUSD because they have a daily range of 100 pips or more.
The trading setup for this strategy is to use the 7 A.M. GMT candlestick on your chart. If it does not match the time on your chart, ask your forex broker. The timeframe to be used in this strategy is a one-hour chart but you can also try other timeframes that suit you.
Forex Strategies Scalping
Scalping can be a demanding forex trading strategy as it requires a great deal of time from the trader. In this strategy, a trader should be able to open and close positions in just a few seconds and to be able to do that, he needs to think and act quickly. These small trades make small profits that will eventually amount to a large sum. A trader’s scalping strategy should be supplemented with technical indicators that tell him the best time to trade.
Below are the simple and most profitable scalping strategies that you can use:
- Moving average strategy
- Stochastic oscillator strategy
- Parabolic SAR indicator strategy
- Bollinger bands strategy
- RSI strategy
- Volume and price action
Can You Make A Living Off Forex?
Anybody can make a living off forex as long as you have learned and understand the basics of it. Once you have absorbed them, the next step is doing more in-depth research. You also have to design your trading plan and strategy so that you can make the most out of your trades. However, it is not easy as it sounds.
Forex trading can be daunting and the experience will not be smooth-sailing. You will also hit bumps along the way as you learn, but with practice, discipline, and determination, you will eventually get the hang of forex trading and make money out of it.
Why Do Most Forex Traders Fail?
Most forex traders fail because they let their emotions get the best of them. Discipline is an important attribute to have as a forex trader and if you let your emotions affect you, your trades will also get affected. Another reason why traders fail is because they do not have a concrete plan. Beginner traders often fall victim to this as they think that they could make a profit right off the bat without polishing their trading plan. There are traders who forget risk management rules and end up having great losses.
As always, best of luck!
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