It’s important to have a solid game plan before you start trading forex. Without a plan, it’s easy to get caught up in the excitement of the market and make irrational decisions.
Some things to consider when developing your game plan:
- Decide what currency pairs you want to trade and research them thoroughly. Make sure you understand the fundamental factors that drive price movement in these pairs.
- Have a clear strategy for entering and exiting trades. Don’t let emotion dictate your decisions.
- Use stop losses to protect your profits and limit your losses.
- Stay disciplined and focused on your goals. Don’t let greed or fear take control of your trading decisions.
Let’s be honest, most inexperienced investors have no real game plan or strategy when it comes to forex markets.
It’s true, some traders use common sense and stick to trading the little they know but for the most part, forex strategies are little more than non existent.
It’s no wonder they get crushed anytime the markets make a strong move in either direction!
But what does this mean for you?
Well, if you’re like me, you are always open to new ideas around forex markets.
That being said, you also want to know that these forex strategies are tried and trusted methods that experienced traders use in the same markets.
Let’s take a look at five popular forex strategies that actually work:
5 Popular Forex Trading Strategies That Actually Work (even for beginners)
1. The Trend Reversal
It is imperative to know how to identify the reversal of trends in the market.
The forex trader who can do this will have an edge over other traders because they are likely to be able to predict when a currency pair might change direction.
It is difficult for even professional traders to predict these changes, so it takes patience and knowledge about patterns that may signal a trend reversal.
The following are some tips on identifying the reversal of trends in the forex market: looking at volume levels, watching out for candlestick patterns, using support and resistance lines as well as Fibonacci retracements.
After every strong or persistent move in one direction, there is always a trend reversal.
As you might expect the objective in this strategy is to make an entry as soon as the reversal is confirmed. At this point, you have reduced your risk and entered the market at a time when the probability is on your side.
When done right this is one of the least risky forex strategies that actually work.
I have added some helpful videos to explain better how to identify the trend reversals in the markets. These methods can be used for all the forex instruments.
Every forex trader needs a reliable and robust trading platform.
The Metatrader 5 from Phillip Futures is an ideal choice. MT5 offers forex traders the ability to perform technical analysis and conduct automated trades through the use of a mechanical trading system known as an Expert Advisor (EA). It also allows you to conduct backtesting of your trading strategy before you commit your funds.
Source: ZUU Online
2. Trading with Momentum
How can you be on the right side of a movement when the big waves are happening in the forex market? That’s what trading with momentum is all about!
Are you looking for a successful way to trade forex? If so, momentum trading may be the answer for you.
This approach involves identifying trends and riding them for all they’re worth. It can be lucrative if done correctly, but it’s also risky. Here are some tips on how to use momentum trading to your advantage.
Trading with momentum is a way to trade in the direction of a trend.
It’s based on the idea that, at any given time, there are two types of traders: those who believe prices will go higher and buy; and those who believe prices will go lower and sell.
Forex momentum trading strategies make daytrading the Forex market easy.
One of the reasons momentum investing markets like stocks and forex work well is because both markets tend to trend, not drift. A trend is a prolonged sequence of either price increases or declines with little consolidation in between.
This makes identifying signals for entering trades much easier than traditional assets where contrarianism may be a more appropriate strategy to identify profitable opportunities as they arise depending on the investment type you’re investing in.
However, it can’t be discounted that time frames have an important effect on return rates as well as risk, which means active traders often trade from daily charts down to micro-second trades all before noon!
Momentum traders rely on this theory by buying when they see others buying (bullish) or selling when they see others selling (bearish).
When momentum swings from bullish to bearish or vice versa, it can lead to big price moves in either direction.
The key for successful trading with momentum is knowing which side has the upper hand before you make your move – otherwise you risk getting caught up in what could be an extended reversal period.
Technical analysis is essential for reading the charts in any given market but no real skill is necessary to recognize momentum.
What’s more, the concept of momentum is something that anyone can understand and a key tenet that can be used as part of a forex strategy.
Simply put, when rates are moving upward, you need to buy and when the charts decline, you sell.
With this in mind, the only real “skill” is to identify trends within the market. You can do this by tracking prices over the course of a month and identifying currency pairs that seem to be making strong moves.
Having taken this data into account, you can start trading these pairs.
Learning to trade a new forex strategy can be hard. So use the software versions of the best forex strategies above to carve out the learning curve and increase your pips.
Expert advisors let you start trading these forex strategies in minutes. And that’s exactly what you need to improve your forex trading tonight.
3. Buying the Breakout
You’ve heard the phrase “buy the breakout” before, but what does it really mean?
The idea is to buy a currency pair when price breaks out of an established trading range. That sounds easy enough, right? Well, not necessarily.
Buying the break out requires that you be able to identify when price has broken through one of these ranges and also be able to determine whether or not the breakout will last long enough for your trade’s profit potential to outweigh its risk.
As you know, when you have significant money in the market or a number of open trades, there is more risk involved.
Playing the breakout is one way to minimize this risk and play it safe. Now, this all comes down to timing but essentially, you need to catch the beginning of a sudden price surge and make an entry as early as possible.
Needless to say, you will also need to time when you sell but ideally, the price surge will give you a nice cushion if the price comes back down unexpectedly.
What are breakout forex strategies?
A simple breakout forex strategy is to buy when the price breaks out of resistance.
There are two types of breakout traders – position breakout traders and swing breakout traders.
Position breakout traders will simultaneously open a long or short position, usually at one standard deviation or more, hoping for a big move on the other side.
Swing breakouts on the other hand will typically enter trades on pullbacks hoping to get in and out before significant volatility takes place.
The key difference between position breakouts and swing breakouts is that for an individual trade, swing breakouts can be riskier than having a lower priced entry but better exit points while position breakouts offer higher rewards than do swings but with greater risks.
It is true that a strategy may be perfect for one person and a catastrophe for another, but there are some that have been long standing and doing well for a greater number of people than the other way round.
4. Quality-Focused Trades
There are a few things that you can do to increase the quality of your trades and make them more solid.
First, make sure that you are always well-informed about the market conditions and news affecting the currencies you’re trading.
Second, use limit orders rather than market orders whenever possible so that you can get a better price and avoid unnecessary slippage.
Third, always use stop losses to protect your profits and minimize your losses. And finally, remember to stay disciplined and patient while trading so that you don’t take unnecessary risks.
By following these tips, you’ll be on your way to becoming a successful forex trader!
Needless to say, not everyone can afford to sit around and study hourly time frames on a daily basis.
For this reason, you should know that the same opportunities exist on every time frame, from 15-minute charts to that of hourly and weekly etc.
With this in mind, choosing to focus on quality instead of the actual charts is one of the forex strategies that actually works, yet is often neglected.
Moral of the story: Choose quality trades regardless of what time frame you study. In the video below you will learn to improve your trading style and trade like banks.
The best forex trading strategies for beginners are the simple, well-established strategies that have worked for a huge list of successful forex traders already.
Through trial and error you should be able to learn Forex trading strategies that best suit your own style.
5. Long Term Position Trading
This is arguably the most suitable of all forex strategies for beginners. As the title suggests, it involves gaining some understanding of the fundamentals in the market and identifying what you believe to be a low entry point.
Having done some research on historical data/charts, you should also be able to estimate what the price could rise to over the long term. Indeed, long term position trading requires patience but it usually pays off.
The truth is, forex trading is not only lucrative but also one of the more reliable performers on an investment portfolio.
With the above forex strategies that actually work, you should be some way closer to making moves in the market that actually make you money!
Should I choose long term or short term trading?
There is no one-size-fits-all answer to this question, as the best approach to long-term position trading will vary depending on the individual trader’s risk tolerance, investment goals, and market analysis.
However, a few general tips can be offered:
- Start by demo trading with a small account to get comfortable with the process before risking any real capital.
- Look for forex pairs that offer a better risk/reward ratio and have solid fundamentals backing them up.
- Use technical analysis to identify potential setups and use stop losses to help mitigate risk.
- Be patient and disciplined; avoid getting caught up in greed or fear and always stick to your plan.
The wealthy traders of the world base their decisions on the daily time frame and higher for a reason – because it works. It gives them the best chance of extracting a profit from the market over an extended period.
We have covered forex trading strategies that work. Did you find it helpful?
One powerful strategy – 3 simple steps. One of the best Forex trading strategies that really works. Check out the video from TopDogTrading:
Also, check out our 3 simple ways to stop forex losses, where you will get an eye-opener to how to handle risk management.