Over the years, countless Forex trading strategies have been invented. They range from basic strategies for beginners to advanced and more complex ones, mostly used by a minority of traders. Some of them are based on the thorough understanding of trading rules and market, while some rely on charts, numbers and pre-defined patterns. It’s up to you whether you’ll buy Forex strategy solution or look for a free trading set of rules.
Whichever strategy you opt for, here’s a couple of things to have in mind:
– Use specific strategy with a specific currency pair.
– Have in mind that there is no strategy that works best in all cases.
– Match the strategy with your individual trading preferences.
– Try to understand the basic principles these strategies are based on, instead of just copying them.
– If you decide to purchase it, learn the difference between manual and computerized trading strategies.
The issue with free Forex strategies is that, in most cases, they haven’t been tested and they are, to say the least, unreliable. Investing your time and money in developing Forex strategies is crucial as there’s no long-term success and profits without it.
Here are some proven and simple strategies that lead to great success in Forex trading!
Breakout is one of the most simple Forex strategies and easy to adopt. If you learn it well,you’ll spend a minimum of time checking your charts. This is why breakout is perfect for beginner traders. However, if you lack the patience to deal with long-term predictions and results, you better find another strategy. The entry rules are quite straightforward: when the candle is 200 SMA on one side, and on the other, it exceeds the range – the entrance should be made in the breakout direction.
The exit is equally important as the entry – traders need to be careful of a false breakout. A hard stop is always used with 200 SMA and harsh exit rules are what ensures a profit in the long run. The downside of this strategy is that it’s unsuccessful during periods when markets range a lot (in the summer) and there’s a high risk of false signals.
Here’s another Forex strategy that’s relatively easy to master. It relies on predicting market movements and it consists of two analysis methods: technical and fundamental analysis. Technical analysis helps traders to easily identify when to buy and when to sell. A quick detection of trading signals is achieved through careful analysis of currency pairs and measuring the price volatility: the history of price predicts its future.
On the other hand, fundamental analysis is based on more general factors such as the current political situation or the unemployment rate. This is why it’s hard to understand the results in the short run. However, in the long run, the fundamental understanding of trends reveals the patterns of currency movements. These two approaches have one thing in common: they are both suitable for beginners because of their low complexity and easily spotted trading signals.
This strategy is extremely popular with both new and experienced traders and investors. What are the rules? There are two things to look for in a stock: liquidity and volatility. Overnight, traders don’t hold any trading positions, which is quite risky because they can easily lose the trade. During the day, they can make numerous trades, but all positions end before the market closes.
What are the benefits of this strategy? Since prices fluctuate throughout the day, many trades can bring large profits. Traders increase their chances for significant profits if they invest more capital, but large trades can be made even without large investments. What are the disadvantages? If leverage is working against you, you might lose substantial sums of money during just one day.
This strategy relies on different principles than day trading and currency analysis. This is a long-term strategy that doesn’t depend heavily on volatility and market environments. The profit is gained slowly and steadily without setting aside lots of time to manage this process. The rule: investor sells a currency with a low-interest rate and this fund is invested in a different currency that yields a higher interest rate.
The great advantage of the carry trade is its simplicity: you just need to look for biggest differentials possible, which depends on the leverage. The downside of this strategy is that temporary and sudden price fluctuations affect the trade.
This can cause a negative position that might last for prolonged periods of time and it demands a great deal of trader’s patience.