A trading strategy in the Forex market is an algorithm that allows you to achieve your goal as quickly as possible with an optimal risk level. The goal is usually to get a certain percentage of profit.
How Forex Trading Strategies Work:
- When you have a strategy, it means that you know what actions to take in each situation in order to maximize profit or minimize potential loss.
- When you have a plan, you understand the end goal. You can divide the plan into several stages and check the effectiveness of strategy at each stage. If you notice that the plan is not working, rebuild the trading system.
Having a trading strategy also has an emotional side. When you have a plan, you can follow it without succumbing to emotion. Example: price went in the opposite direction after you opened the trade, but your plan stipulates an acceptable loss. So there is no need to close deal with fear. You will not wait until the last minute hoping that the price will turn around. Basic Forex Trading Strategies for Beginners
Forex trading strategies for beginners are trading systems that include:
Few indicators. The chart should not be crowded so that the trader does not get confused.
Large time frames. Time frames are easier to navigate starting from the H1 hour frame as you have more time for analysis.
Minimal risks. Rare signals with relatively small profits, but with a high trigger ratio.
All profitable strategies described below are basic versions. It must be finalized and the indicator parameters must be modified to suit a particular asset and time frame.
Position Trading: Position trading is a long-term strategy. It is based on wave theory, according to which the market develops in a cyclical manner: any growth is followed by stagnation.
How to build a trading strategy and describe the strategy
Cryptocurrencies and stock assets are best suited for position trading. Currency pairs move in a narrow corridor, while cryptocurrencies and stock assets have no growth ceiling and have extended trends. Time frames: starting from H4 and above.
Risk level: medium. main risk is stopping and exiting. On longer time frames, pip cost is much higher on minute intervals. Therefore, even a simple correction can cost you a lot. trader must have enough margin to maintain the position during a pullback.
Profit percentage: Profitability of long-term investment – 15-50% annually.
Deal Duration: Long-term trading. Trades are held in market from several days to several weeks or months.
Entry/exit point: The two best scenarios for entering the market are to open a trade the moment the market exits the flat zone or when a fundamental impulse occurs. For example, after issuing quarterly or annual reports. Good indicators to identify the trend are Alligator indicator, ADX, moving averages. Exit the market as the case may be.
Advantages and disadvantages: Advantages of the strategy:
- More profitability. Unlike a trend strategy, a trader earns more when using a swing trading strategy. For example, a trend trader earns 100 pips when the trade is closed. The swing trader makes 50 pips on the trend and closes the trade at the beginning of the correction. The price falls by 15 pips, and the swing trader opens the trade again. Profit 50 + 65 = 115 points.
- Less risks. The position trader waits for the correction and protects the trade with a stop order. If the stop loss is triggered, the loss is equal to the depth of the retracement. A swing trader closes the trade at the beginning of the correction. And if the pullback turns into a new trend, the swing trader has nothing to lose.
How to build a trend trading strategy
Trend trading involves opening a trade at the beginning of a trend movement and closing it at the reversal. The trader’s goal is to find the beginning of the trend and avoid mistaking the correction as a reversal and closing the position too soon.
Strategy description: One of the best strategies for trading in the Forex market is to open a position when the price breaks out of the flat or during a trend reversal. Time Frame – Starting from H1 The strategy is well suited for day trading in the Forex market and position trading in the stock markets.
Risk level: below average. The main risk is delay in opening the position. Novice traders can miss the beginning of a trend and enter the market when it has mostly exhausted itself. If you monitor the chart regularly, and set stop loss and take profit, the risk is minimal.
Profit percentage: depends on the chosen time frame and risk appetite. On the hourly time frame, you can find a trend longer than 24-48 hours. With daily asset fluctuations of 80 to 100 points, you can find a trend with a length of 50 points or more.
Deal duration: Depending on the time frame. On the H4 time frame and above, the strategy turns into a medium-term strategy. Monitor the chart regularly to look for trend reversals. : Advantages and disadvantages
main advantage is that it is a good strategy for beginners. On long time frames trend is relatively stable, the investor has time to assess the situation, and there is no need to constantly monitor the chart. After 50% of the trade is closed, you will not have to monitor chart anymore. It is also possible to make profit on individual small trend movements, as shown in the example above
How to build a range trading strategy
Range trading includes flat trading and channel trading strategies in Forex market. It is based on following idea: price mostly moves in a fixed channel around an average that can be represented by a moving average. The price tends to return to its average value
Strategy description: This strategy contains two trading options:
- Breakout trading: The channel is built based on the points where the price reverses most often. If the limits are broken, a trade should be opened in the direction of the breakout.
- Channel trading: The channel is built on extremes – the points that the price reached but did not break. A trade should be opened when the price reverses at the border towards the middle of the channel.
Profit percentage: according to the time frame. Within a day, the price can give a signal or signals of 20 to 30 points each.
Transaction Duration: strategy works on time frames starting from M30 for daily, medium and long-term strategies. It is not suitable for rapid speculation, because price has a high momentum movement at precise time intervals, which violates the logic of the average.
Where do I start learning trading? You start trading by opening an account with a broker and downloading a trading platform such as MetaTrader 4 (MT4). You then deposit funds, choose the markets you want to trade and are on the ground. Let’s start by discussing what happens when you place an order, or as many of us call it; “execute a trade.” “.
How to get rich from trading?
- Prepare and learn: Acquire knowledge: Before starting stock trading, you must invest time and effort in understanding the basics of the financial markets and trading concepts. …
- Develop an investment strategy…
- Control emotions and good risk management.
