Beginners looking for the best platform to learn forex trading are welcomed to explore my carefully selected strategies. Forex has grown to become the largest financial market in the world. In this position, it has overtaken the stock market in terms of trading volume, with a daily turnover of over $7 trillion, as of 2022.
Little wonder many are getting into it. For beginners, forex holds a lot of promise for profit. While this is true, you must understand the potential risks involved so you can plan your trades accordingly.
On the bright side, it’s easier to make better trading moves with the right knowledge. As a beginner, there are a few strategies you need to keep in your archive to help you make the best of your trades.
Of course, there are many trading strategies available, but you don’t need all of them. The ones we recommend are those that are straightforward and allow you to make trading decisions without unnecessary confusion. If you’re ready to learn about them, let’s begin.
5 Simple Forex Trading Strategies to Get Started
1. Carry Trading Strategy
If there’s one trading strategy you should learn as a beginner, it’s the carry trading strategy. The operating principle of carry trading is that you borrow a currency with a low interest rate and use it to buy a currency with a higher interest rate.
The idea is to profit from the difference in interest rates, known as the “carry.” This strategy works best in stable economic environments where central banks have set clear interest rate policies.
For example, you could borrow Japanese yen (which often has a lower interest rate) to invest in Australian dollars, where interest rates might be higher.
As you enjoy the straightforwardness of the strategy, also note that carry trading does have some risks. For instance, exchange rates can fluctuate, and if the currency you’re borrowing appreciates against the one you’re investing in, you could end up with a loss.
But you can minimize the risks by reading up on global economic news, central bank announcements on interest rates, inflation reports, and political changes when placing your trades.
Also Read:
- How to Earn Passive Income by Promoting Web Hosting Services
- Top 3 Micro-Task Websites for Earning Quick Cash Online
- How to Make Money with Affiliate Marketing Using Pinterest
2. Breakout Strategy
The breakout strategy is another simple and effective way to start your forex trading journey. Breakouts occur when the price of a currency pair moves out of a previously established range.
This could be above a resistance level (the highest point a currency reaches before falling back) or below a support level (the lowest point before the currency starts to rise again).
Here’s how it works: traders set buy or sell orders when the currency price breaks out of this range. The key idea behind this strategy is that once the currency breaks through a certain level, it’s likely to keep moving in that direction for a while, giving traders an opportunity to profit from the momentum.
For example, if the EUR/USD pair is fluctuating between 1.10 and 1.15, and it suddenly rises to 1.16, that would be considered a breakout. Traders who have set their buy orders at 1.15 will be in profit as the price continues to rise.
To minimize risks, many traders use stop-loss orders in conjunction with breakout trades. A stop-loss automatically closes a trade if the price moves in the opposite direction, limiting potential losses.
3. Scalping Trading Strategy
Scalping is a popular short-term trading strategy. If you prefer quick results, this strategy will likely appeal to you. It involves making many small trades throughout the day, aiming to gain tiny profits from each one.
The idea behind scalping is to take advantage of small price movements. Instead of waiting for big market shifts, you’re looking for small fluctuations in the price of a currency pair that you can profit from quickly.
Most scalpers use charts with time frames as short as 1 to 5 minutes to catch these tiny price movements. For instance, if you’re trading the EUR/USD pair and notice a slight movement from 1.1250 to 1.1260, you might place a quick buy order and sell it as soon as you gain a small profit.
One of the downsides to this strategy is that it requires you to pay constant attention to price movements and to execute trades with speed.
But aside from that, it has a low-risk nature for each individual trade. This makes it a good entry point for those just starting out.
4. Swing Trading Strategy
Swing trading is a more relaxed strategy that involves holding positions for several days or even weeks. Unlike scalping, where you go in and out of the market within minutes, swing trading allows you to profit from larger price movements over a longer period.
The main advantage of swing trading is that it allows beginners to avoid the stress of rapid, high-frequency trading. You don’t need to sit in front of your screen all day; instead, you can analyze the market, place your trades, and check in periodically.
If you choose this strategy, you’d need to learn how to use technical analysis tools such as moving averages, support and resistance levels, and chart patterns to identify potential entry and exit points.
So, for example, if you notice that a currency pair has been trending upward but temporarily dipped, you might take a long position in the hope that the uptrend will continue.
This strategy suits beginners who want to learn more about technical analysis while avoiding the frenzy pace of day trading or scalping.
5. Day Trading Strategy
Day trading involves opening and closing all your trades within the same trading day. Unlike scalping, where trades are executed in a matter of seconds, day traders may hold their trades for several hours.
The key to day trading is to avoid holding any positions overnight to minimize the risk associated with market gaps. If you choose to use this strategy, it’s possible to make substantial profits if you can consistently predict short-term market movements.
However, you also need strong discipline, quick decision-making, and solid risk management, as losses can pile up just as quickly.
If you want to cut down on the potential for losses, then you have to learn how to use technical analysis and charts to find short-term trading opportunities.
The challenge with day trading is that it requires a high level of concentration and quick decision-making. However, it offers the advantage of limiting your exposure to market risks and allows you to start each trading day fresh.
Tips for Forex Trading Beginners
Now that you’ve learned about five key forex trading strategies, here are some essential tips to help you start right.
1. Start with a Demo Account
Before you put in real money, practice trading on a demo account. It gives you the chance to test strategies and learn forex trading works without risking your capital.
2. Learn Risk Management
You need this aspect even more. Never risk more than 1-2% of your account balance on a single trade. If possible, always use stop-loss orders to limit potential losses.
3. Stay Informed on Market News
Now that you’re going into forex trading, you must keep your eyes on the news. Stay up to date with global economic news and other geopolitical events that could impact the forex market.
4. Use Leverage Wisely
Leverage is a forex structure that allows you to control larger positions with a smaller amount of capital. While this can amplify profits, it can also magnify losses. As a beginner, use leverage wisely.
5. Be Patient and Consistent
As you already know, forex trading is not a get-rich-quick scheme. Success in the forex market comes with patience, practice, and continuous learning. So, be patient with the system.
Also Read:
- 5 Best Survey Sites to Make Extra Cash in Your Free Time
- How to Make Money Selling Digital Products on Gumroad
- How to Start a Translation and Transcription Service-based Business Remotely
Begin Your Forex Trading Journey with the Right Strategies
Nothing is ever easy at the beginning. The same could be said for forex trading. It’s lucrative as it is demanding.
To take advantage of the numerous profitable opportunities forex offers, you must learn to be on top of your game. One thing we recommend is to start with very simple strategies.Â
You don’t have to learn complex skills yet. The simple strategies we explained here are enough to give you a healthy head start. And it gets even better if you put in more hours of practice and consistency in using them.
With all the right strategies, you can build a strong foundation for your forex journey. In no time, forex could become a profitable venture for you.
