Forex trading is one of the most popular ways to invest your money, and with good reason. The market never sleeps, so there are always opportunities for you to make trades. You can choose among a variety of currencies from all over the world to diversify your portfolio.
While Forex has been around since ancient times, and 80% of working-class Malaysians are aware of it, succeeding is still a difficult task. If you want to curb it, take a look at this Forex guide for Malaysians.
Forex trading is a lucrative industry for traders who know how to make the right decisions. For example, one of the biggest questions for novice traders is choosing a quality broker. For instance, finding a reliable and trustworthy best Forex broker in USA can be quite challenging as there are numerous options on offer. Fortunately, with thorough online research and reviews, experienced traders can pinpoint which brokers offer all the necessary security protocols, advanced technology, and diversified trading options for their individual needs and make successful investments. History has witnessed several legendary traders, for instance, Jesse Livermore. For beginners, time and patience are key to mastering this market. In this article, we will show you some of the best strategies to use when starting forex trading.
1. Breakout Trading
This involves looking for highs and lows in the market, known as support levels and resistance levels, respectively. When these levels are broken through, it signals that momentum has shifted or “has broken out” of its previous range. The idea behind the breakout trading is that when momentum shifts direction, prices are likely to continue breaking trend lines until they reach their next support level.
Breakouts can be identified on charts by drawing trend lines along the bottom of a price chart and then across the top to show resistance. If this trend line were drawn from one low point to another low point, traders would say a break below support once dropped below this level.
2. Price Action Trading
Price action trading is a way of analyzing the market by looking at prices. This type of analysis does not use any other indicator to help you make your decision but just charts that show how price reacts. The benefit of price action trading is that it can help you avoid confusion and make better decisions. For instance, having multiple indicators on your chart may cause conflicting signals, which will lead to an overload of information for beginners.
3. Carry Trade
The carry trade is a term used in currency trading to describe the practice of borrowing or selling short another currency with lower interest rates to fund buying investments that pay a higher yield—also known as “selling high and buying low.” This strategy can work because the difference between interest rates on two currencies reflects the opportunity cost of holding one currency versus another.
4. Trend Trading
The trend trading strategy uses trends in currency pair prices to identify buying and selling opportunities in forex. Trend traders participate in trends for relatively long periods. When using this technique, you must pay close attention to what the market is telling you about its direction at any given point within a trend cycle. Traders can also use supporting tools such as Moving Averages to identify trends.
5. Momentum Trading
Momentum trading involves buying or selling currencies when the price moves with great momentum in one direction, on the presumption that this momentum will continue. Beginner traders can use momentum trading strategies for both rising and falling markets. The basic premise of momentum trading is that if prices rise, they are likely to rise more. Similarly, if prices are falling, then they are likely to fall further.
6. Scalping
Scalping is a trading strategy where traders open and close positions within seconds or minutes, usually waiting for a few pips of profit from each trade. The system is based on the principle that small profits made regularly lead to large profits.
7. Retracement Trading
Retracement trading includes temporary changes in the direction of a certain trading instrument. Retracements should not be confused with reversals – while these two indicate major changes, the former are just minor pullbacks that can help you capitalize on short-term price fluctuations within an ongoing trend.
Forex Trading Tips
For those who are new to Forex trading, here are some tips that can help traders make it big in this business:
- Be patient and disciplined: If you are starting with forex trading, set your mind to build a strong foundation before taking risks by withdrawing any profits from your account for other trades.
- Set a realistic goal for yourself: Do this to stay focused and accomplish it in time. It also helps keep traders motivated throughout the learning process by knowing what’s ahead once their initial goal has been achieved.
- Know your limits: When taking risks in forex trading, newcomers must set limits for themselves when trading for profits or capital.
Prepare yourself financially and emotionally: First financial preparation includes knowing your capital- how much capital you require per trade/ market position. Emotionally, it would be best to prepare yourself by knowing that sometimes, the market becomes contrary to your expectations, which is completely normal.
