Trading forex as a way of earning. Sounds nice, right? Alternatively to other types of income, here it’s not just enough to be a good practitioner, but this is where theory pays off too, since this market isn’t the place where you can just keep your fingers crossed and hope for the best. This is the market where you need to dive deeper, test, read, analyze, decide, and finally make it. If you’re the one who has made such a decision to start trading, then just start. You might think "easy for you to say," but it’s actually the way how everything works – you just start, try and see what happens. There is a very interesting thing about the word "start" – a good beginning makes a good ending. Always. Trade forex as a beginner: step by step and get to the top.
This is the market where you need to dive deeper, test, read, analyze, decide, and finally make it. If you’re the one who has made such a decision to start trading, then just start.
What is a forex trading strategy?
How to become one of those for whom forex is the source of income? This is the right question for you to ask yourself at the beginning of your trading journey, as it brings your responsible attitude and patience to the table. Get ready. It’s impossible to get profit in the forex market without compliance with a formulated strategy and a systematic approach to your work. There are a lot of newbies prioritizing quantity over quality; thus, they’re in a hurry to make money in forex without even doing their homework: learning forex trading tips for beginners simultaneously with practice on the demo account, which is the right path to defining their trading strategy.
In order to start trading without any risks and losses, we highly recommend devoting your time to learning the basic concepts and terms according to the professional forex trading strategies. The next step you should definitely consider taking is to go through some ready-made and tested trading strategies that are offered by experienced traders in detail. To understand what strategy will work personally for you and your trading style, it’s important to test it first. So, why is it so important to have a strategy? A trading strategy helps to catch how the market works and predict the direction of the price movement. Even experienced traders won’t make a move without having a defined system that meets their trading goals.
There are a lot of newbies prioritizing quantity over quality; thus, they’re in a hurry to make money in forex without even doing their homework: learning theory simultaneously with practice on the demo account, which is the right path to defining their trading strategy.
A trading strategy can be understood as a system of defined rules that are considered to be your lighthouse; without them, you have all the chances to be in the middle of nowhere. In order to make a profit - stick to those rules. A well-developed trading strategy allows a trader to enter the market at specified conditions without any hesitation and exit it within the given timeframe while drawing a profit. You should probably understand that "nobody is immune" to losses in the foreign exchange market, but it all comes down to your trading attitude and how serious it is.
Top 4 forex strategies that work
There are a lot of newbies who strive to improve the strategy from the first days of trading, which leads to missing the most critical aspects and doubles the risks. Choose a method and strictly follow its rules as you’re just starting. Now, let’s get down to the popular forex trading strategies for beginners.
Channel trading strategy
Being considered one of the most successful forex trading strategies, this one can be interesting for newbies while they’re learning the basic concepts of the forex market. It’s impossible to upskill trading expertise without knowing about the support and resistance levels that are formed within the trading range. The main purpose of this technique involves forex market instability – it always goes up and down.
Forex channel strategy can be applied when a certain price corridor (channel) is clearly observed on the chart. The channel boundaries can be determined by the upper and lower bar, beyond which the value of the currency doesn’t cross over a certain period of time. When it comes to currency trading, it’s carried out according to the data of the channel. It’s advisable to hold the trade until the opposite level of the channel is approached by the price.
A breakout refers to a price that moves outside a specified support or resistance level with increased volume. Breakout trading is considered to be an important strategy because these "breakouts" are the signal of increased market volatility. You can use volatility to your advantage by catching a new trend once it’s observed.
According to a breakout strategy, a trader should enter a long position after the market price breaks through a resistance level or enter a short position after the price breaks through the support level. However, according to some experienced traders, it’s suggested to wait until it’s clear that a break-through does signal a real up or downtrend. It’s advisable to place your stop loss above or below the breakout candle, at a minimum.
Triple candlestick strategy
It’s a simple and, at the same time, very effective trading strategy for beginners. It all comes down to determining a combination of three candles. You can work on any timeframe, but remember that the higher the chart interval is, the more accurate the Price Action signals will be. The extremum of the first candle in the pattern must always be above or below the extremum of the previous candle. The second candle of the pattern should confirm the development of this correction. As long as the extrema of two previous candlesticks on the chart are consistently increasing or decreasing – the third one follows the same scenario. A trader should place an order at the moment of the third candlestick formation. In case of a price decline, a sell position should be opened, and when there is a consistent price increase, it is the green light for opening a buy position.
- If there is a downtrend observed on the chart, then the High and Low prices of the first candle in the pattern should be lower than the High and Low prices of the previous candle.
- In case of an uptrend on the chart, the trader should wait for the formation of a candle, the extremum of which will be higher than the extremum of the previous candle.
Pin bar trading strategy
Long-tail bars (or pin bars) usually have smaller candlestick bodies than the classic pin bars and are the most important signals on the price chart because they give traders a very strong clue (better than other bars) about the price directions. At the same time, their tails are always much longer than the ones of neighboring candles which is very easy to be noticed on the chart.
Now, a pin bar demonstrates a situation where the trend has reached its peak, and there is a price reversion in the opposite direction. This is how the situation in the market can change and play into the hands of a trader. Any currency pairs are suitable for trading using this strategy. It’s recommended to consider choosing the H4 and higher timeframes (D1, W1) for receiving more significant and reliable signals.
A trade can be opened when the model is fully formed. It’s better to enter the market with pending orders: Buy Stop for the bullish scenario and Sell Stop for the bearish one, which is located above the maximum value of the nose. Thus, traders are waiting for a complete rollback to occur, and the trend will go in the right direction.
It’s better to devote more time to mastering theory and then practice it. The best thing you can do is to consider trading and testing the above-mentioned strategies on our demo account where there is no risk of losing money. It would be optimal to choose a strategy with a minimum number of indicators and analytical tools. The profitability of trade strongly depends on your emotional stability and concentration of attention.
Remember, it’s essential to prioritize forex trading strategies that work for you and your trading expectations.