Forex trading can be tricky, to begin with, but if you know the right strategies, it can become a piece of cake. As a beginner trader, you need to find suitable forex trading strategies that will work for you to be successful in the foreign exchange market.
Meaning of a Forex Strategy
A trading strategy in forex is a predefined set of rules for a trader to let him know when he should enter the trade, the ways to manage it and the right time to close it. The trading strategy varies from one trader to other, and the traders must try many strategies before finding the “perfect one”. Even if they find a forex strategy that will deliver promising results, traders often do not stick to a particular strategy for a long period. If you are a beginner, it is best to choose some basic strategies first and try them through the risk-free demo accounts offered by various global brokers.
Also read: What is the Forex Market?
Basic Forex Trading Strategies Available for Beginners:
Price Action Strategy: It is a type of forex trading strategy that lets traders make decisions on the basis of changes in the prices of a specific instrument rather than incorporating technical indicators. There are various benefits of price action strategy, such as keeping your chart clean and a lesser risk of information overload. Additionally, the strategy can help you better understand the forex market and identify patterns smoothly.
Trend Trading Strategy: This kind of strategy allows traders to identify trade opportunities based on the upward or downward direction of the trend. The basic principle on which this strategy works is that a particular trading instrument continues to move in the exact direction as may be the current trend.
Position Trading Strategy: The main objective of the position trading strategy is to gain profits through long-term trend movements by neglecting short-term noises that occur regularly. This trading strategy particularly attracts long-term traders who tend to hold their positions open for a long time, including weeks, months and even years sometimes. Position trading is a challenging trading style as it needs traders to have a lot of patience and discipline to ignore all the noises and stay calm even if the position is moving against the trader.
Video Source : The Trading Channel
Day Trading Strategy: Unlike scalpers, day traders don’t hold trades for mere seconds. Additionally, they focus on a particular session or time of day. Day traders are usually slower than the scalpers as they only take 2-3 trades daily. The strategy is apt for those who wish to close the positions before the end of the trading day but don’t want to take the pressure of scalping.
Scalping Strategy: In scalping, traders try to take advantage of minor price movements during the day. The duration of the trade varies from a few seconds to minutes. To be a good scalper, you must be good with figures and can make decisions rapidly even if there is a lot of pressure. Scalpers usually spend most of their time on the screen and keep their focus on some specific markets only. The biggest advantage of the scalping strategy is that you are not required to hold your positions overnight.
Every trader has their own trading skill set that they can use to identify their edge. Accordingly, they can tailor their trading strategy. However, they should never stick to one trading strategy; as the market constantly evolves, so does the trader’s personality. Therefore, they can take many free personality tests that can help them get better insights into their personality to come up with a great trading strategy. One can find the best trading strategy by trying various strategies out through a demo account with virtual funds. You can find several online forex brokers that offer the facility of risk-free demo accounts. However, the countless options available can confuse you; therefore, you can also check out the brokers review online to better understand the features of the broker in question.