The Most Common Forex Trading Strategies for Beginners
Most beginners in trading are in a rush to start trading, but they make the same mistake – they don’t follow the trading plan. It is the presence or absence of a strategy that becomes the decisive criterion for success or failure. Therefore, before you start working with real assets, you should learn on a demo account, study the available materials at https://forexstore.com/, and look for the best Forex strategy that will suit you.
Forex trading strategies are sets of rules that a trader follows to make a profit. These are essentially clear signals to which one reacts, opening or closing positions at the right moment. Such signals can be figures on the chart, indicators, the course reaching a certain level, or even a combination of several signals. Experienced traders advise testing new strategies for less than 6 months to evaluate their effectiveness. In this article, we will look at popular Forex trading strategies so that you at least know the range of choices.
What is a Forex trading strategy?
As you already know, a strategy can be thought of as a set of rules that dictate when to enter, manage, and exit trades. The complexity of a strategy can vary. Technical analysts may find it easier to define their entry and exit rules, while fundamental analysts may require more discretion.
This way, effective Forex trading strategies guide traders on when and where to buy or sell currency pairs. However, there is no universally “best” one. Still, some are more effective in certain situations.
Most commonly used Forex trading strategies
In general, all existing strategies can be divided into three main categories:
Short-term ones are considered the most aggressive and bold, as traders are forced to open many trades. Such strategies include scalping and intraday.
Medium-term strategies require technical analysis, and the deal can remain open for an average of 1–45 days.
Long-term strategies are suitable not only for beginners but also for professional traders, since you can deal with deals that are open for a period of up to 2 months.
Now, let’s study in detail and meticulously the main strategies used by traders. These options are considered the most successful Forex trading strategies.
Fibonacci in Forex is a popular trading strategy used in the Forex market based on the Fibonacci sequence, a mathematical sequence of numbers in which each number is the sum of the previous two numbers. In Forex trading, this strategy involves using the Fibonacci retracement tool to identify potential areas of support and resistance on a price chart.
To use the Fibonacci strategy, traders start by identifying a trend in the market and then trace the Fibonacci retracement tool from the high or low point of the trend to the opposite end. They then look for potential buy or sell opportunities at key Fibonacci levels.
A trend-following strategy is an approach by which traders follow the market trend and try to make trades in the direction of the movement of this trend. The trader must determine the direction of the current trend in the market, using indicators that show the slope of the price curve. If the trend is bullish (prices are rising), the trader should buy the asset, and if the trend is bearish (prices are falling), the trader should sell the asset.
Breakout Trading allows traders to find the best opportunities to enter the market after the price crosses a certain level of support or resistance. For example, if the price breaks through the resistance after a long period of trading in the market, this can be a signal for the trader to start taking long positions. On the contrary, if the price breaks through the support, this can be a signal to enter the market with short positions.
Scalping is a strategy in which traders execute many trades with a short holding period. Such transactions can last only a few seconds or minutes. This requires the trader to quickly enter and exit the market to obtain the maximum profit in the shortest possible time. This is only possible in highly liquid markets, and the Forex market is ideal for implementing this strategy.
The price of assets depends on news and events, and this strategy is based on taking advantage of the impact of news on price changes to make a profit. For example, if a company reports poor financial results, its stock price can fall. But it’s not always easy to tell exactly how the market will react to the news. Moreover, even if it happens, you need to react quickly. Therefore, traders have to rely not only on their experience, signals, and news but also on their intuition.
How to choose the best Forex trading strategy
Choosing the best Forex trading strategy depends on many factors, including personality traits, discipline, and goals. To make a final decision, you should learn the basics of technical and fundamental analysis, experiment with a demo account, and test different strategies until you choose one or several that suit you best.