Welcome to our comprehensive guide on Forex trading strategies for beginners. If you’ve ever asked yourself, What are the best Forex trading strategies for beginners?, you’re in the right place. This blog post is designed to equip you with the knowledge and strategies you need to confidently enter the world of Forex trading.
We’ll start by understanding the basics of Forex trading, discussing the easiest strategies for beginners, and exploring the most successful strategies in the industry. We’ll then delve into the financial aspects of Forex trading, answering questions like “Is $1000 enough for Forex?” and How to get 20 pips a day in Forex?.
For those interested in self-learning, we’ll provide guidance on how you can teach yourself to trade Forex and how many hours a day you should dedicate to studying Forex. We’ll also introduce you to advanced Forex trading strategies, including the 5 3 1 Forex strategy, and tips on how to trade Forex like a pro.
In addition, we’ll discuss Forex trading with different brokers, including TD365, EightCap, BlackBull Markets, and EasyMarkets, providing an overview and discussing specific trading strategies with each broker.
Finally, we’ll round up with the top 7 Forex trading strategies for beginners, including trend trading, range trading, breakout trading, momentum trading, news trading, carry trade, and MACD trading strategies.
What are the best Forex trading strategies for beginners? Understanding Forex Trading
Forex trading, also known as foreign exchange trading or currency trading, is the buying and selling of currencies on the forex market with the aim of making a profit. It is one of the most active trading markets in the world, with traders placing over $7.5 trillion worth of trades every day according to the 2022 Triennial Central Bank Survey.
What is the easiest forex trading strategy?
The easiest forex trading strategy, particularly for beginners, is often considered to be the “Trend Following” strategy. This strategy is based on the concept that markets tend to move in trends over time, and those trends can be a valuable indicator for future price movements.
Here’s a more in-depth look at how it works:
- Identify the Trend: The first step in trend following is to identify whether the market is trending upwards (bullish trend) or downwards (bearish trend). This can be done by looking at a series of past prices on a chart. If the prices are generally moving upwards over time, it’s an upward trend. If they’re moving downwards, it’s a downward trend.
In the image below, we can observe a distinct bearish trend in the EURUSD daily chart. This trend is identified by connecting the prominent peaks and troughs, which form a series of lower highs and lower lows. This pattern is characteristic of a bearish trend.
Interestingly, the price has been oscillating within a descending channel, bounded by two diagonal lines. These lines have effectively contained the price movement, preventing any significant breakout to the upside or downside. This channel pattern has persisted for nearly nine months, indicating the strength and persistence of the bearish trend.
In essence, the bearish trend and the descending channel together provide a comprehensive picture of the market dynamics at play, offering valuable insights for traders navigating the Forex market.
- Enter the Market: Once a trend has been identified, the next step is to enter the market. In an upward trend, this would involve buying with the expectation that the price will continue to rise. In a downward trend, it would involve selling (or short selling) with the expectation that the price will continue to fall.
- Exit the Market: The final step is to exit the market when the trend appears to be ending. This could be when the price starts to move in the opposite direction, or when it reaches a pre-determined profit target.
- Use of Stop-Loss Orders: A key part of trend following, and indeed any trading strategy, is the use of stop-loss orders. These are orders to exit the market if the price moves against you by a certain amount, helping to limit any losses if the trend does not go as expected.
While the Trend Following strategy is relatively simple to understand and implement, it’s important to remember that no strategy is 100% foolproof. All trading involves risk, and it’s important to manage that risk carefully. It’s also worth noting that trends can sometimes be hard to spot, and that what looks like a trend may sometimes just be random noise.
The Trend Following strategy is often considered the easiest forex trading strategy, it’s still important to learn as much as you can, practice on a demo account before risking real money, and always trade responsibly. Happy trading!
What should a beginner do in forex trading?
As a beginner in forex trading, here are some steps you should consider:
- Educate Yourself: Start by learning the basics of forex trading. Understand what forex trading is, how it works, and the terminologies used. There are many online resources, books, and courses available to help you with this.
- Choose a Reliable Forex Broker: A forex broker provides the trading platform and tools you need to buy and sell currencies. Look for a broker that is well-regulated, has a good reputation, offers a user-friendly trading platform, provides excellent customer service, and has transparent fee structures. Check our Broker Review table for our comprehensive list of brokers we have reviewed.
- Practice with a Demo Account: Most forex brokers offer demo accounts where you can practice trading with virtual money. This is a great way to gain experience and learn how to trade without risking real money.
- Develop a Trading Plan: A trading plan includes your financial goals, risk tolerance, and trading strategies. It serves as your guide in making trading decisions and helps you avoid impulsive actions based on emotions.
- Start Small: When you’re ready to start trading with real money, it’s advisable to start small. This allows you to gain real trading experience without risking a large amount of money.
- Use Risk Management Tools: Forex trading involves risk. Use risk management tools like stop-loss orders to protect your investment from significant losses.
- Keep Learning: The forex market is dynamic and constantly changing. Keep learning and staying updated with market trends and news. This will help you make informed trading decisions.
Remember, forex trading is not a get-rich-quick scheme. It requires time, patience, and effort to become successful.
What is the most successful strategy in forex trading?
The most successful strategy in forex trading can vary greatly depending on the trader’s knowledge, experience, and risk tolerance. However, one strategy that is often considered highly effective is the “Price Action Trading” strategy.
Price Action Trading is a strategy that involves analyzing the historical price data of a currency pair, without the need for additional indicators. Traders who use this strategy believe that the historical performance of a currency pair is a strong indicator of its future performance.
Here’s how it works:
- Identify Support and Resistance Levels: These are the levels at which the price of a currency tends to rise or fall before changing direction. Support is the price level at which demand is thought to be strong enough to prevent the price from falling any further, while resistance is the price level at which selling is thought to be strong enough to prevent the price from rising further.
- Look for Price Signals: Price signals are patterns formed by price movements over time, which can indicate potential future price movements. Common price signals include pin bars, engulfing patterns, and inside bars.
- Set Stop-Loss and Take-Profit Points: Before making a trade, decide on the maximum amount you are willing to lose (your stop-loss point) and the point at which you will take your profits (your take-profit point).
- Manage Your Risk: Never risk more than a small percentage of your trading account on a single trade. This helps to ensure that you can survive a few losses in a row without depleting your trading account.
Remember, no strategy guarantees success in forex trading. It requires continuous learning, practice, and emotional control. It’s also important to always stay updated with market news and changes.
Forex Trading with EasyMarkets
EasyMarkets is a well-known forex broker that offers a wide range of trading instruments, including forex, commodities, indices, and cryptocurrencies. They are known for their user-friendly platform, comprehensive educational resources, and excellent customer service.
Overview of EasyMarkets
EasyMarkets was established in 2001 and is regulated by the Cyprus Securities and Exchange Commission (CySEC) and the Australian Securities and Investments Commission (ASIC). They offer a variety of account types to cater to different trading needs and provide access to over 200 trading instruments.
One of the key features of EasyMarkets is its proprietary trading platform which is intuitive and easy to use, making it suitable for both beginners and experienced traders. They also offer a free demo account where beginners can practice trading without risking real money.
For more detailed information, you can check out our comprehensive review of EasyMarkets.
To start trading with EasyMarkets, you can open an account on their website by clicking Here.
What are the best Forex trading strategies for beginners? Investment and Returns in Forex Trading
Forex trading is an investment, and like all investments, it requires capital. The amount of capital you need can vary depending on your financial goals and risk tolerance.
Is $1000 enough for forex?
The question of whether $1000 is enough to start forex trading is a common one, especially among beginners. The answer, however, is not straightforward as it depends on various factors including your financial goals, risk tolerance, trading strategy, and the forex broker you choose.
Forex trading is leveraged, meaning you can control a large amount of money with a small initial deposit, known as margin. For example, if a forex broker offers a leverage of 100:1, you can trade $100,000 worth of currency with just $1000. This high leverage can increase the potential for profits, but it also increases the risk of losses, including losses that can exceed your initial deposit.
Here are some points to consider:
- Trading Strategy: Your trading strategy plays a crucial role in determining how much capital you need. Some strategies require significant capital, while others can be executed with a smaller account.
- Risk Management: It’s important to have a solid risk management strategy in place. As a rule of thumb, never risk more than 1-2% of your trading account on a single trade. This means that with a $1000 account, you should not risk more than $10-$20 on a single trade.
- Broker Requirements: Different forex brokers have different minimum deposit requirements. Some brokers allow you to open an account with as little as $100, while others may require a larger initial deposit. Check our Broker Review table for our comprehensive list of brokers we have reviewed.
- Financial Goals: Your financial goals also play a role in determining how much money you should start with. If you’re looking to generate a substantial income from forex trading, you’ll likely need more than $1000 to start with.
- Emotional Considerations: Trading with money that you can’t afford to lose can lead to emotional trading decisions. Therefore, it’s important to only trade with money that you can afford to lose.
While it’s possible to start forex trading with $1000, it’s important to consider your individual circumstances and goals. Forex trading involves significant risk and it’s important to understand these risks before you start trading. Remember, the key to successful forex trading is not just about the amount of money you start with, but also about your trading strategy, risk management, and ongoing education.
How to get 20 pips a day in forex?
Achieving 20 pips a day in forex trading is a goal many traders aim for. However, it’s important to note that forex trading is not just about setting a pip goal, but also about developing a robust trading strategy, managing risk, and maintaining discipline. Here’s a potential approach to achieving this goal:
- Develop a Trading Strategy: A trading strategy is a set of rules that guide your trading decisions. It could be based on technical analysis, fundamental analysis, or a combination of both. For example, you might decide to trade based on certain technical indicators like moving averages or RSI, or based on economic news events.
- Set a Daily Target: If your goal is to achieve 20 pips a day, you need to set this as your daily target. This means that once you achieve this target, you stop trading for the day. This can help prevent overtrading and protect your profits.
- Manage Your Risk: Risk management is crucial in forex trading. One common rule is to never risk more than 1-2% of your trading account on a single trade. This means that even if a trade goes against you, you won’t lose a significant portion of your account.
- Use Stop-Loss and Take-Profit Orders: Stop-loss orders can limit your losses if the market moves against you, while take-profit orders can lock in your profits when the market moves in your favor. For example, if you’re aiming for 20 pips a day, you might set a stop-loss order 20 pips away from your entry point, and a take-profit order 20 pips away in your favor.
- Review Your Trades: At the end of each trading day, review your trades. Look at what worked and what didn’t. This can help you refine your strategy and improve your trading over time.
Remember, while it’s possible to aim for 20 pips a day in forex trading, it’s not guaranteed. Forex trading involves risk, and it’s possible to lose money. Always trade responsibly and only with money you can afford to lose.
Is there a 100% winning strategy in forex?
In the world of forex trading, there is no such thing as a 100% winning strategy. Forex trading involves significant risk, and it’s possible to lose money. It’s important to understand that losses are a part of trading and what matters more is the overall profitability across many trades.
Successful trading is not about winning every single trade, but about managing your risk and maintaining a positive risk to reward ratio. This means that even if you lose more trades than you win, you can still be profitable if your winning trades bring in more profit than your losing trades bring in losses.
It’s also crucial to have a solid trading plan, stay disciplined, and not let emotions drive your trading decisions. Continuous learning and adapting to market changes are also key components of successful trading.
Remember, while forex trading can be profitable, it’s not a get-rich-quick scheme. It requires time, patience, and a good understanding of market dynamics. Always trade responsibly and only with money you can afford to lose.
Forex Trading with TD365
TD365 is a popular forex broker known for its user-friendly platform and competitive trading conditions.
Overview of TD365
TD365, established in 2001, is a well-regulated forex broker. They offer a variety of account types to cater to different trading needs and provide access to a wide range of trading instruments.
One of the key features of TD365 is its proprietary trading platform, which is designed with the smart trader in mind. The platform is intuitive and easy to use, making it suitable for both beginners and experienced traders. They also offer a free demo account where beginners can practice trading without risking real money.
TD365 offers low cost, tight fixed spreads, and fast trade execution. With TD365, you can trade the world’s major financial instruments, including indices, stocks, forex, commodities, and cryptocurrencies.
For more detailed information, you can check out our comprehensive review of TD365. To start trading with TD365, you can open an account on their website by clicking here.
It’s worth mentioning that TD365 is associated with Trader Tom, a well-known figure in the trading community, who provides educational content and market analysis. This can be a valuable resource for both new and experienced traders.
What are the best Forex trading strategies for beginners? Top 7 Forex Trading Strategies for Beginners
Forex trading can seem daunting at first, but don’t worry! Here are seven strategies that can help you navigate the world of forex trading as a beginner:
Trend Trading Strategy
The Trend Trading Strategy is a popular approach for beginners in forex trading. This strategy is based on the concept that “the trend is your friend”. Here’s how it works:
- Identify the Trend: The first step in trend trading is to identify the direction of the market trend. This can be done by looking at a forex chart over a longer time frame (like daily or weekly) and identifying whether the currency pair is making higher highs and higher lows (uptrend), or lower highs and lower lows (downtrend).
- Use Moving Averages: Moving averages can be used to confirm the trend and provide potential entry signals. For example, you can use two moving averages: a fast one (like the 50-day moving average) and a slow one (like the 200-day moving average). When the fast moving average crosses above the slow moving average, it could indicate the beginning of an uptrend. Conversely, when the fast moving average crosses below the slow moving average, it could indicate the beginning of a downtrend. elow is an example with the USD/JPY and two DMA crossovers (50 DMA & 200 DMA).
- Enter the Trade: Once a trend and a moving average crossover have been identified, the next step is to enter the trade. In an uptrend, this would involve buying with the expectation that the price will continue to rise. In a downtrend, it would involve selling (or short selling) with the expectation that the price will continue to fall.
- Exit the Trade: The final step is to exit the trade when the trend appears to be ending or when the moving averages cross over again. This could be when the price starts to move in the opposite direction, or when it reaches a pre-determined profit target.
- Use Stop-Loss Orders: A key part of trend trading is the use of stop-loss orders. These are orders to exit the market if the price moves against you by a certain amount, helping to limit any losses if the trend does not go as expected.
While the Trend Trading Strategy is relatively simple to understand and implement, it’s important to remember that no strategy guarantees success in forex trading. It requires continuous learning, practice, and emotional control. It’s also important to always stay updated with market news and changes.
Range Trading Strategy
The Range Trading Strategy is a common approach used in forex trading, particularly in markets that lack a strong directional trend. Here’s how it works:
- Identify Non-Trending Instruments: Traders using this strategy must look for trading instruments that are not trending. This can be done by observing the price action of the instrument or using indicators such as the moving average and the Average Directional Index (ADX). The lower the ADX value, the weaker the trend.
- Identify the Range: After finding a suitable trading instrument, you must identify the range within which the trading instrument is consolidating. This is a price level where the currency pair has repeatedly risen and fallen between, but not broken out of. The top of the range is known as the resistance level, and the bottom is known as the support level.
- Enter the Trade: A classic range trading strategy will advise you to sell when the price hits the area of key resistance and buy when the price hits the area of key support. Some traders will focus on two particular levels, while others will trade “bands” or “areas”. For example, if you identified 1.17 as the key resistance level but the price often stalls at 1.1690 or 1.1695, you can highlight that area (1.1690 – 1.17) and start looking for selling opportunities within it. Only focusing on that particular level might mean you will lose out on good trading opportunities, as prices can often reverse before hitting it.
- Use Stop-Loss Orders: A key part of range trading is the use of stop-loss orders. These are orders to exit the market if the price moves against you by a certain amount. For example, if you buy at the support level, you might set a stop-loss order just below the support level.
As an example, consider a currency pair that is range trading (like EUR/SEK). The ADX has low readings most of the time, indicating a lack of a strong trend. We can see that the price has often bounced off the 10.00/04 support area while having difficulties breaching the resistance area between 10.27 and 10.30.
While the Range Trading Strategy is relatively simple to understand and implement, it’s important to remember that no strategy guarantees success in forex trading. It requires continuous learning, practice, and emotional control. It’s also important to always stay updated with market news and changes.
Breakout Trading Strategy
The Breakout Trading Strategy is a method used by traders to take advantage of price movements once the price breaks through a previously defined support or resistance level. Here’s how it works:
- Identify Support and Resistance Levels: The first step in breakout trading is to identify key support and resistance levels. These are price levels at which the currency pair has repeatedly risen or fallen, but not broken through.
- Wait for the Breakout: Once the support and resistance levels have been identified, the next step is to wait for the price to break through these levels. This is the “breakout”. It’s important to note that not all breakouts result in new trends. Some might be false breakouts, so it’s crucial to use other indicators to confirm the breakout.
- Enter the Trade: If the price breaks through the resistance level (in an upward direction), this could indicate the start of a new uptrend, and it might be a good time to enter a long position (buy). If the price breaks through the support level (in a downward direction), this could indicate the start of a new downtrend, and it might be a good time to enter a short position (sell).
- Set Stop-Loss and Take-Profit Points: As with all trading strategies, it’s important to set stop-loss points to limit potential losses if the market moves against you, and take-profit points to secure your profits when the market moves in your favor.
- Manage Your Risk: Never risk more than a small percentage of your trading account on a single trade. This helps to ensure that you can survive a few losses in a row without depleting your trading account.
Remember, while the Breakout Trading Strategy can be profitable, it’s not without risk. It requires practice, a good understanding of market dynamics, and a solid risk management plan.
Momentum Trading Strategy
The Momentum Trading Strategy is a technique used by forex traders to take advantage of market trends by buying securities that are going up and selling securities that are going down. Here’s how it works:
- Identify the Trend: The first step in momentum trading is to identify the direction of the market trend. This can be done by looking at a forex chart and identifying whether the currency pair is making higher highs and higher lows (uptrend), or lower highs and lower lows (downtrend).
- Use Momentum Indicators: Momentum indicators, such as the Relative Strength Index (RSI) or the Moving Average Convergence Divergence (MACD), can be used to confirm the trend and provide potential entry and exit signals. For example, an RSI above 70 may indicate that a currency is overbought and could soon reverse to the downside, while an RSI below 30 may indicate that a currency is oversold and could soon reverse to the upside.
- Enter the Trade: Once a trend and a momentum signal have been identified, the next step is to enter the trade. In an uptrend, this would involve buying with the expectation that the price will continue to rise. In a downtrend, it would involve selling (or short selling) with the expectation that the price will continue to fall.
- Exit the Trade: The final step is to exit the trade when the momentum indicator signals that the trend may be reversing. This could be when the RSI crosses back below 70 (for a buy trade) or rises back above 30 (for a sell trade).
- Use Stop-Loss Orders: A key part of momentum trading is the use of stop-loss orders. These are orders to exit the market if the price moves against you by a certain amount. For example, if you buy at the support level, you might set a stop-loss order just below the support level.
While the Momentum Trading Strategy can be profitable, it’s not without risk. It requires practice, a good understanding of market dynamics, and a solid risk management plan. Happy trading!
News Trading Strategy
The News Trading Strategy is a method used by forex traders to take advantage of price movements following major news events. Here’s how it works:
- Monitor Economic Calendars: Economic calendars list the dates and times of major economic events, such as interest rate decisions, employment reports, and GDP data releases. These events can cause significant price movements in the forex market.
- Understand the Expected Impact: Before the news event, analysts will usually provide forecasts about the expected outcome. If the actual outcome deviates significantly from the forecast, it can cause large price movements.
- Enter the Trade: Once the news is released, traders will interpret the data and make trades based on the actual outcome. For example, if the U.S. employment report shows a higher than expected increase in jobs, it could strengthen the U.S. dollar and traders might buy USD pairs.
- Exit the Trade: The final step is to exit the trade when the price movement starts to slow down or reverse. This could be a few minutes, hours, or even days after the news event, depending on the impact of the news and the time frame of your trading strategy.
- Use Stop-Loss Orders: A key part of news trading is the use of stop-loss orders. These are orders to exit the market if the price moves against you by a certain amount. This is particularly important in news trading, as the increased volatility around news events can lead to large price swings.
Below is an example of the impact the July NFP release had on the US500.
While the News Trading Strategy can be profitable, it’s not without risk. News events can lead to increased volatility in the forex market, and the price can move rapidly in either direction. Therefore, it’s important to have a solid understanding of the forex market and to use risk management tools like stop-loss orders.
Carry Trade Strategy
The Carry Trade Strategy is a forex trading approach that involves borrowing in a low-interest-rate currency and investing in a high-interest-rate currency, aiming to capture the difference in interest rates. Here’s how it works:
- Identify the Currencies: The first step in a carry trade strategy is to identify a currency pair where the base currency has a high-interest rate and the quote currency has a low-interest rate.
- Enter the Trade: Once the currency pair has been identified, the next step is to buy the high-interest-rate currency (using the low-interest-rate currency). The idea is that you will earn the interest differential between the two currencies.
- Hold the Position: Carry trades typically involve holding the position for a long period to earn interest. The interest is paid on the currency that is borrowed and earned on the currency that is bought.
- Exit the Trade: The final step is to exit the trade when the interest rate differential narrows or when the exchange rate moves unfavorably.
It’s important to be familiar with the characteristics of the currency you are buying. For example, the Australian Dollar often benefits from rising commodity prices, while the Canadian Dollar has a positive correlation with oil prices.
Consider the AUD/JPY pair as an example. There was a period when this currency pair was performing extremely well, making it an ideal candidate for a carry trade. During this period, the interest rate differential was favorable, and the exchange rate trend was stable.
While the Carry Trade Strategy can be profitable, it’s not without risk. Changes in interest rates, economic conditions, or exchange rates can impact the profitability of carry trades. Therefore, it’s important to monitor these factors and manage risk appropriately.
MACD Trading Strategy
The Moving Average Convergence Divergence (MACD) Trading Strategy is a popular method used in forex trading. It involves using the MACD, a trend-following momentum indicator, to identify potential trading opportunities. Here’s how it works:
- Understand the MACD: The MACD consists of two lines and a histogram. The MACD line is the difference between two exponential moving averages (usually the 12-day and 26-day EMA), and the signal line is typically the 9-day EMA of the MACD line. The histogram represents the difference between the MACD line and the signal line.
- Identify Signal Line Crossovers: A bullish signal is given when the MACD line crosses above the signal line, and a bearish signal is given when the MACD line crosses below the signal line. These crossovers can suggest potential entry and exit points.
- Consider the Histogram: The MACD histogram can also provide valuable information. If the histogram is above the zero line, it indicates that the MACD line is above the signal line (bullish), and if it’s below the zero line, it indicates that the MACD line is below the signal line (bearish).
- Enter the Trade: Once a signal line crossover has been identified and confirmed by the histogram, the next step is to enter the trade. In a bullish signal, this would involve buying with the expectation that the price will rise. In a bearish signal, it would involve selling (or short selling) with the expectation that the price will fall.
- Exit the Trade: The final step is to exit the trade when the MACD line crosses the signal line in the opposite direction of your trade. This could indicate a potential reversal in the price trend.
- Use Stop-Loss Orders: A key part of the MACD Trading Strategy is the use of stop-loss orders. These are orders to exit the market if the price moves against you by a certain amount, helping to limit any losses if the trend does not go as expected.
While the MACD Trading Strategy can be effective, it’s not without risk. It’s important to use this strategy in conjunction with other technical analysis tools and indicators to confirm signals and manage risk.
Forex Trading with BlackBull Markets
BlackBull Markets is a platform that offers forex trading with MT4, MT5, and TradingView. They offer low-cost institutional spreads for retail forex traders, with flexible leverage up to 500:1, spreads from 0.0 pips, and an average execution speed of 20ms. They also provide demo accounts for those new to the Forex market.
Overview of BlackBull Markets
BlackBull Markets is proud to offer a diverse range of tradable assets. These include over 70 major, minor, and exotic currency pairs, energies like crude oil and agricultural cash crops, equities in US companies like Tesla, Apple, and Netflix, major stock indices such as US30, S&P500, NAS100, and precious and industry metals like gold, silver, and copper.
To start trading with BlackBull Markets, you need to create an account, download MT5 or MT4, and start trading after funding your live account. The FX market is fast-paced and highly liquid, averaging 7 trillion+ USD per day in trade volume, making it the largest market in the world.
They also offer educational resources like Forex 101 lessons to help users understand the foreign exchange market, currency pairs, and key terms and concepts in forex trading. Read more in our BlackBull Markets Broker Review.