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Forex Trading Strategies for Beginners - Updated & Free!
If you are a Forex beginner, you will be wise to be careful in choosing the Forex trading strategies that you are going to use as you begin your trading journey. As a new Forex trader, you can help shift the odds in your favor by choosing a good Forex trading strategy for beginners. The article below outlines some effective, forex trading videos for beginners free download, simple Forex trading strategies which only require the use of a single technical indicator.
Forex trading strategies best suited to beginners have the following characteristics, which are not easy to find together:. Big claims are often made for a large number of trading strategies, but the only trading strategies which have clear rules and are reliably profitable over the long-term are those which rely upon trend following or momentum principles as one category, and mean-reversion strategies as the other mean reversion is when a price tends to return to its average value.
There are a lot of other strategies which rely upon various quirks or fundamental or sentimental criteria, but these either tend to not be profitable over the long-run or are overly complicated and requiring of more discretion than a beginner can safely exercise. It forex trading videos for beginners free download also important that the new trader is not exposed to large losses, no matter how temporary, as they can be psychologically crushing to even experienced traders.
This is why the best Forex trading strategies for beginners allow for low risk and small position sizing of trades, forex trading videos for beginners free download. Time frame is also important, as a major reason why most beginner Forex traders fail is due to their being encouraged to trade on shorter time frames. Trading profitably with shorter time frames is an acquired skill, so it is best for beginners to stick to using daily charts and perhaps using 4 hour or hourly charts at the same time to find more precise, lower-risk trade entries.
Of course, beginners may not have a lot of time to devote to Forex trading, or want to get used to it slowly, which is another reason why the trading strategies outlined here may be traded on only the daily or weekly time frames. This means that it will only take a few minutes of your time once per day or per week to trade them. The final factor in determining a good trading strategy for beginners is whether the strategy provides some room for learning.
The forex trading videos for beginners free download trader should be able to learn using a strategy with a positive expectancy, but the strategy should offer more than just pushing buttons according to set rules.
The best way this can be accomplished is for the strategy to have clear rules, but forex trading videos for beginners free download the beginner trader to record their own optimism about each trade before it is taken once they have some experience in using the strategy. Then after, say, 20 trades, the trader can check their records to see how well their forex trading videos for beginners free download matched the results of the trades.
Once the beginner trader has established an ability to determine correctly in advance which trades are likely to turn out better, the trader might decide to risk more on the favored trades, or to pass on entering the unfavored trades.
In this way, the new trader can build up their trading skills, while still trading and hopefully making money. The best way to get started is to identify some simple trading strategies that have a good track record of working in Forex.
Advertisement Trade long or short with any of our selected brokers Trade now. The best simple trading strategies for beginners should be technical strategies based on either momentum or mean-reversion principles, easy to follow, and conservative. In this section, I will set out the detailed rules of some trading strategies which new traders can use to both profit and improve their trading. It has been well established by academic research that the price movement of liquid financial instruments shows a momentum effect.
This means that when prices are moving strongly in one direction, it is more likely that this directional movement will continue over the short-term than reverse. Also, it is likely that any further movement in the direction of the trend will be stronger than any movement against the trend.
We can use this momentum property to see that when prices are breaking to new long-term highs or lows, we have an edge on our side which we can use to profit. So only these two currency pairs should be traded when using this trading strategy.
What is this strategy based upon? We can see that when we got a daily close at a new day high price, there was an edge in favor of the directional move continuing, forex trading videos for beginners free download. Only one indicator is used in this trading strategy, the Average True Range ATR indicator set to 15 days on a daily chart. Everything else can be accomplished with a naked price chart. Monitor daily chart for entry signal, which is a new day high or new day low closing price.
Just count 50 candlesticks to the left if you think you see a new high or low closing price. The horizontal line chart tool can be used to check this in almost all charting packages. The closing price should be higher or lower than all the previous 50 closing prices, not from the highest or lowest prices achieved by the wicks of previous candlesticks.
Entry signal : a new day high closing price is a signal to enter a long trade. A new day low closing price is a signal to enter a short trade. Trade entry : if you are trading only on the daily time frame which is recommendeda trade should be entered right away after the entry signal is generated. Stop loss : this should be based upon the value of the ATR indicator set to 15 days. Tighter stop losses tend to ensure greater overall profitability although they also lower the win percentage.
I recommend as the best balance between the two a stop loss set to half of the value of the ATR indicator. Trade management: after 2 days from the trade entry, if the trade is still open, move the stop loss to break even.
If the market price is worse than the stop loss, close the trade at the market price, forex trading videos for beginners free download. Trade frequency: you can have more than one trade in the same direction in the same currency pair at the same timebut as you will be moving stop losses to break even after 2 days, forex trading videos for beginners free download, you will not have more than two trades at risk at the same time in the same currency pair.
Exit strategy: you can choose between simply forex trading videos for beginners free download a time-based exitwhich should be between 5 and 8 days the upper limit has historically given the most profitable performance after entering the trade, or some kind of a trailing stop once the price has reached a floating profit at least double the risk.
For example, if your stop loss were set forex trading videos for beginners free download 50 pips, you would begin applying the trailing stop once the trade has reached a profit of pips. These are the complete rules for my day breakout Forex trading strategy, forex trading videos for beginners free download.
Beginner traders can trade this knowing that this strategy has performed well in recent years, but should be aware that most trades are not winning trades — you can however expect to win more on the winning trades than you lose on the losing trades. I have allowed some flexibility on the rules for an exit strategy as this is an area where beginners need to do a lot of learning. Most traders find exits challengingas they can also be psychologically difficult. Beginners will probably find it useful to start by following a strict time-based exit strategy, but at the end of each day to make a note whether they wanted to exit the trade or not, forex trading videos for beginners free download.
Many traders will be surprised to find that they will get better results just exiting after the same number of days each time than by trusting their faith in price action indicating that it is time to get out of the trade. Judging the price movement yourself to trigger your own trade exit signal is very challenging for most peopleso this is a good method you can use to practice mentally without harming your trading account. I mentioned that it is possible to trade this strategy on a shorter time frame than the daily chart.
I recommend that beginners start with the daily chart and stick to it, but more experienced traders can drop down to the 4 hour or even hourly chart once the daily chart has given a trade entry signal to try to find a more precise entry. Most traders will find this does not improve their overall performance with this strategy.
Another strategy that can be recommended for beginners is a variation on the day breakout trading strategy. It is the same, with just two changes to the rules:. After you get the day high or low close, you wait for another day.
If at the end of that second day the day closes in the opposite direction to the breakout, you have a trade entry signal. We can see that when we got a pullback following a daily close at a new day high or low price, there was an edge in favor of the directional move continuing. This edge was even stronger over the short-term than it was shown to be in the breakout strategywith a stronger expectancy of a positive close the following day. I have explained elsewhere several trading strategies based upon trading the weekly time frame.
This strategy recommends identifying trade opportunities on the weekly time frame and using the 4 hourly or hourly chart to identify an entry signal, which I explained above. It can also be possible to use a daily chart here to find the entry signal, forex trading videos for beginners free download. The important thing forex trading videos for beginners free download that a hard stop loss is always used which is less than the value of the day ATR indicator at the time of the trade entry, forex trading videos for beginners free download.
Just as in the other trading strategies already outlined, it is important not to risk more than 0. Most of the time, markets are not trendingand all of the strategies I have already outlined in this article are only active in trending market conditions. While it is true that you will never become a successful, profitable trader unless you learn to trade patiently, it can be good to have another tool in your trading kit for those periods where we have no trends in the two major Forex currency pairs.
The first step here is to identify when conditions are ranging. The second step is to find a currency pair which has been moving sideways for the past 50 days on relatively high volatility. The way to find a currency pair which has been going sideways for the past 50 days is to pull forex trading videos for beginners free download a daily price chart and use the horizontal line tool to draw horizontal lines at the highest and lowest points of the last 50 days of candlesticks.
Alternatively, you can use the Donchian Channel indicator set to 50 days. If the lines look relatively flat across the screen, you have a currency pair which you can trade intelligently with this Forex range trading strategy. You should then set up the ATR indicator against the daily price chart and apply it. In one, set the time period to 50 days, in the other, set the time period to days.
If the value of the day ATR is at least 1. You are now ready to wait for a trade entry signal. Unlike the other trading strategies already discussed here, you are trading against a breakout, so your trade direction is in the opposite direction, forex trading videos for beginners free download. A trade entry signal is given when the wick of a daily candlestick goes past the day high or low, but the candlestick closes in the other direction, ideally closing in the other half of its price range.
This gives you a long trade entry signal. The ATR 50 value is more than 1. Note how yesterday the wick of the daily candlestick just breached the day low at This could have been used to take a long trade entry yesterday when the bullish candlestick closed within the top half of its price range.
The stop loss would be just below the low of the entry candlestick at The stop loss should be placed 1 pip beyond the high or low of the candlestick which exceeded the day high or low. Trade management is less important in this kind of range trading strategy. For a trade exit strategy, it is best to use as a target the other boundary of the range. For example, if you took a short trade from a bearish reversal at the day high, the day low can be your take profit target for a trade exit.
Of course, if the price gets close to the target and shows clear signs of running out of momentum or looks as if it already reversing against you, it will probably make sense to exit early.
Forex beginners can benefit from using the best simple trading strategies which work in Forex, because these strategies are relatively easy to follow, and because they have a track record of being profitable over the long-term, putting odds more in favor of profitability. Finally, these strategies outlined here are combined with tips for using them to learn how to become a forex trading videos for beginners free download Forex traderby comparing signals and trade outcomes with how you feel at the time, to learn whether you have begun to develop skills which will allow you to trade more profitably than an algorithm.
The best strategy for trading Forex is any relatively simple strategy which exploits the technical edge in following long-term trend in the major Forex pairs, using relatively tight stop losses and letting winners run. You can find a published Forex strategy likes the ones shown in this article, or forex trading videos for beginners free download can use the principles they are built on to design your own similar strategy that suits you better but can also work.
Adam Lemon began his role at DailyForex in when he was brought in as an in-house Chief Analyst. Adam trades Forex, stocks and other instruments in his own account. He has previously worked within financial markets over a year period, including 6 years with Merrill Lynch.
Learn more from Adam in his free lessons at FX Academy. We commit to never sharing or selling your personal information.
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