One of the biggest problems for beginners trying to venture into the world of forex trading has been the failure to understand the basic strategies to employ when trading. Currency trading can be difficult but still fascinating to learn about. If you are a beginner, don’t worry, there are many forex trading strategies that are simple. Here you will get to know some of the basics that every starter in the forex market should know about.
But first, you need to know that currencies are affected by political and global environmental events, so you have to always keep records on what’s happening worldwide. You should be aware of things happening on the other side of the world while you are sleeping
Do you want to be successful?
A positive attitude is a key thing here. You must also be able to combine analysis with effective implementation. By doing this you will have to improve your skills, having in mind that best traders are born with talent, experience, and hard work.
1. Follow the trend
One of the most important forex trading strategies is following the trend. As a beginner, following the trend is a great strategy. It is easy and simple to obtain a hang of. The only thing you need is to open positions in the trend’s direction. Market trends can be the short, medium or long term, so you must decide the kind of strategy you want to follow. The decision here will determine kind of charts to use, but the strategy will consistently follow the trend.
In case of an upward trend, regressions are anticipated in the price to buy a pair. This is to ensure a good entry price. Should there be a downward trend, you have to wait for the price to return to normal, before handing over the coins.
2. Trend lines
One of the most effective and easiest charting tools in the market is trend lines. You draw a straight line joining two points on the chart. For upward trend, a line is drawn below joining two or more points. For downward trend, a line is drawn over the chart joining two or more points. More often, prices follow the trend lines when drawing near them.
3. Corrections and retracements
Our third forex trading strategy is a correction, which can be measured in the trend available in simple percentage. So generally, market correction runs a notable part of the previous trend. 50% trace above trend is the most common. 38% and 62% for Fibonacci retracements are also two highest levels, this is followed by investors in Forex who include financial institutions such as banks.
4. Locating resistance and support levels
You have to find resistance and support levels. It’s best to sell close resistance levels and purchase close support levels. The resistance level is always crest above the previous high. When resistance is eventually broken, it becomes a support. Similarly, when a support is eventually defeated it becomes resistance.
5. Moving Leverages
Moving leverages is one of the forex trading strategies that best suits beginners since it signals to either sell or buy. This makes it possible to know the state of a present trend.
One of the most common techniques to utilize moving leverages is using different leverages in the same chart, hoping for the crossing of the leverages. For example, if you have an upward trend and the price in a correction, at the period that a quick-moving leverage (10-day) crosses above a slow-moving leverage (20-day), then this is possibly a good buy.
These help you identify the markets in an overbuy or oversell state. Moving trends give you proof of the market trend while oscillators tell you the correct time to open a trade. Relative Strength Index and Stochastic are the two common oscillators. These two oscillators operate on the scale of 0 to 100. When the RSI is above 70, the purchase is affected, and when it is below 30 it shows no overbooking. The values of oversold and overbought stochastic are 20 and 80.
Have you heard of the famous divergence?
It is one of the most useful signals that supplies the oscillators. Divergence happens when the direction of oscillating signal varies from the direction of the similar price.
7. The Average Directional Movement Index (ADX)
ADX helps you know whether a market is oscillating between ranges or is in trend phase. It measures the robustness of a market direction or trend but does not show the direction. For that, you have to use tools or indicators.
The Bottom Line
No matter the forex trading strategies you want to execute, do not forget that you are a starter. The quick profits you make can turn into losses if you don’t make good choices on currency trades. If you use the strategies above properly, then they can quickly strengthen your trading account to a big amount.