The factors that make up a trading strategy are diverse and we can find elements such as the world economy, market conditions, economic theories, types of analysis, among others. For this reason, the number of Forex strategies for beginners and professionals is incredibly high, and practically every trader in the market has their own method.
People just starting out in financial trading can get confused and frustrated at not finding a suitable strategy to get started.
You may be wondering, "What are the elements of simple trading strategies that work?" Well, first of all, a simple strategy should be easy to understand and use. However, if we delve into the details, we must also consider other elements such as the types of analysis required, the amount of attention and time required, among other factors. Next, we will explore these factors in order to define simple strategies.
The Nature of the Forex Market
Before continuing, it is important to clarify one of the most notable features of Forex: it is a market in which many people participate. Although it sounds obvious, beginners generally consider Forex to be a completely uncontrollable amorphous entity. To understand the functioning of the market, it is key to keep in mind that there are a large number of participants and that their activity may influence currency prices. There are certain operators who try hard enough to have an advantage over others. Without further ado, we will now introduce 3 simple Forex strategies that you can quickly start applying if you are a beginner. Each of these strategies has different requirements of time, capital and mental discipline, so you will surely find one that suits your style. However, keep in mind that the goal is not to copy these strategies, but to study them, test them and try to improve them with your own adaptations. The 3 strategies in question are: breakout, trend monitoring and carry trade.
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1. Breakout trading strategy
This novice Forex strategy is one of the least time consuming, although it can be difficult to master by impatient traders eager to see action and make quick profits. Preparation of strategy: Market conditions are what determine the times when you open and close an operation. In the case of this Forex strategy for beginners, the conditions necessary to operate correspond to a market in range, that is, a level at which prices do not show considerable movements and volatility is low. To distinguish these conditions, it is possible to use a simple moving average of 200 periods in the 1-day time frame. The 200 period refers to an entire year of trading, so to measure conditions you would be using the annual average. Next, imagine a price range on either side of this moving average based on the currency pair and average daily volatility. For example, a range can be 50 pips. When the price of the currency pair is above or below this range, the break signal will be given.
2. Market entry
You must open an order when a candle is presented that exceeds the price range established in the previous point. For example, if the price range is 50 pips, the signal would be given when a candle of 50 pips or more appears and traverses one of the ranges. If the candle crosses the upper level, a buy order is opened. Otherwise, you must establish a sales order.
3. Market exit
In this breakout trading strategy, the stop loss is the same 200 SMA. If the price subsequently returns to the 200-period SMA, the breakout is likely to have been false and the market will continue to range or intend to fully change. of trend. This simple Forex strategy has many advantages for beginners. For example, it is a very easy method to understand and apply, and it does not require much time because you only have to check the market once a day. However, the weak point of this strategy is that it only works when the market is in range. It is worth mentioning that there is no perfect strategy, so you will surely find false signals. You can modify the market entry rules of this strategy to find more opportunities or reduce your risks. If you tighten the rules, you will suffer fewer losses, but you will find fewer trading opportunities. Otherwise, you will find more opportunities, but you will have more losses. Ultimately, the decision depends on your appetite for risk.