Best Forex Trading Strategies for Beginners

The basic basis of trading in the foreign exchange market comprises of understanding how currencies are quoted and what the exchange rates represent. In the Forex market, all currencies are quoted in pairs and for this reason the act of Forex trading involves simultaneously buying one currency against another currency, which is sold.

The Forex market is the most liquid financial market in the world making it extremely popular and tempting to individuals of all backgrounds from across the globe due to its easy accessibility and excellent profit earning potential.

Forex trading is available in Algeria, exciting and educational, and filled with countless opportunities but many traders fail to learn how to become successful or achieve good results. Learning to trade Forex and for that matter, learning how to trade in general can be difficult, but not in the least impossible.

Multiple comparative websites will display shining Broker reviews which will provide traders with an overview of only the best the broker has on offer. We have listed the Best Brokers for traders situated in Algeria that covers a wide range of trader needs.

A Forex Strategy Is Not A Tactic

A Strategy:  A Strategy is a technique which is studied in detail and has been developed to achieve clear targets.

A Tactic:  A Tactic is only one technique that is used to achieve a result in the short term.

What Are The Best Strategies For Beginners?

Before we tackle the specifics, there are a few important elements we would like to note that should go hand in hand with a traders trading strategy.  Traders need to be aware of elements such as their level of education, time and money management, emotional preparation, consistency, timing and considering topics like liquidity, volume, and volatility.

But Let’s get to the fun part – trading strategies!

Before we tackle the specifics, there are a few important elements we would like to note that should go hand in hand with a traders trading strategy.  Traders need to be aware of elements such as their level of education, time and money management, emotional preparation, consistency, timing and considering topics like liquidity, volume, and volatility.

But Let’s get to the fun part – trading strategies!

Trend Following

The Trend Following strategy is fundamentally essential to beginners as it is very simple and easy to understand and master.  The basic idea behind this strategy is that traders keep an eye on the trend and open their position in the direction of the trend.  Traders need to decide if they want a long-term or a short-term strategy which in turn will give them an idea of what type of charts to make use of.

Market trends are usually long, medium or short-term. 

The Trend Following strategy requires a close observation of charts and patterns for even the slightest change.  A trader will in turn benefit from the “ups and downs” of the financial markets, following the trend without a need to predict or calculate.

The Trend Following strategy is fundamentally essential to beginners as it is very simple and easy to understand and master.  The basic idea behind this strategy is that traders keep an eye on the trend and open their position in the direction of the trend.  Traders need to decide if they want a long-term or a short-term strategy which in turn will give them an idea of what type of charts to make use of.

Market trends are usually long, medium or short-term. 

The Trend Following strategy requires a close observation of charts and patterns for even the slightest change.  A trader will in turn benefit from the “ups and downs” of the financial markets, following the trend without a need to predict or calculate.

Use of Trend Lines

Trend Lines are one of the most effective and easy to master concepts that will help beginners in trading. Traders draw a straight line that connects two different points on a chart – connecting prices together.

The Trend Line gives the trader a rough idea of the direction where the value of an investment might move.  If a trader can learn how to draw trend lines on their own charts, this may further increase their chances of making a successful trade.  So, If the trend is down, the trader would draw the line over the chart and if the trend line gets broken, that would immediately indicate that the trend is changing. 

Trend Lines are one of the most effective and easy to master concepts that will help beginners in trading. Traders draw a straight line that connects two different points on a chart – connecting prices together. The Trend Line gives the trader a rough idea of the direction where the value of an investment might move.  If a trader can learn how to draw trend lines on their own charts, this may further increase their chances of making a successful trade.  So, If the trend is down, the trader would draw the line over the chart and if the trend line gets broken, that would immediately indicate that the trend is changing. 

Breakout

Breakouts are seen as an excellent indicator for traders as when they occur, they are usually seen as a signal which shows that a new upward trend is beginning.

 A breakout will happen when a market moves in a new direction, beyond the support and resistance indicators.  Traders must keep in mind that the participants are the ones who define these levels, showcasing the supply and demand, which can change rapidly.

Not every breakout will result in a new trend, but – it is still a good trading opportunity for traders to be in the right place at the right time and enter an emerging trend in the early stages.

Breakouts are seen as an excellent indicator for traders as when they occur, they are usually seen as a signal which shows that a new upward trend is beginning.  A breakout will happen when a market moves in a new direction, beyond the support and resistance indicators.  Traders must keep in mind that the participants are the ones who define these levels, showcasing the supply and demand, which can change rapidly.

Not every breakout will result in a new trend, but – it is still a good trading opportunity for traders to be in the right place at the right time and enter an emerging trend in the early stages.

Momentum

The Momentum strategy is especially popular with beginners as it is basically a technique in which traders can buy or sell currencies, based on recent price trends.

Through this, traders can determine how likely it is for a trade to turn out being profitable.  The Momentum strategy is determined by aspects like trading volume or the rate in which price changes and if an asset price moves strongly in a certain direction, a trader will in essence bet that this price will keep moving in that direction.

The Momentum strategy is especially popular with beginners as it is basically a technique in which traders can buy or sell currencies, based on recent price trends. Through this, traders can determine how likely it is for a trade to turn out being profitable.  The Momentum strategy is determined by aspects like trading volume or the rate in which price changes and if an asset price moves strongly in a certain direction, a trader will in essence bet that this price will keep moving in that direction.

Daily Fibonacci Pivot Trade

The Bark (meaning the name) is much worse than the bite. This strategy is not as confusing as it may sound.  This strategy uses the Fibonacci retracements as a basis, combined with the daily, (weekly or monthly) pivot levels.

The Bark (meaning the name) is much worse than the bite. This strategy is not as confusing as it may sound.  This strategy uses the Fibonacci retracements as a basis, combined with the daily, (weekly or monthly) pivot levels.

Simple Moving Average Crossover (SMA)

The Simple Moving Average Crossover (SMA) strategy is another strategy that is great for beginners and traders can identify trend direction and can use it to also set up buy and sell signals.  The SMA takes older data from a set period of time to showcase the average price of a financial instrument.

The Simple Moving Average Crossover (SMA) strategy is another strategy that is great for beginners and traders can identify trend direction and can use it to also set up buy and sell signals.  The SMA takes older data from a set period of time to showcase the average price of a financial instrument.

Bollinger Band Bounce Trade

The Bollinger Band Bounce Trade strategy is suitable for the ranging market and is a very good way to cope with the restricted range of price movements.  The Bollinger Band Bounce Trade strategy forms a limit around the short-term price movement.

The Bollinger Band Bounce Trade strategy is suitable for the ranging market and is a very good way to cope with the restricted range of price movements.  The Bollinger Band Bounce Trade strategy forms a limit around the short-term price movement.

Forex Dual Stochastic Trade

The Forex Dual Stochastic Trade Strategy assists traders by giving them an indication when a price might be trending but it’s overextended and traders should change their position on that particular asset.  This is a strategy which might look rather simple at first glance, however beginners need to first obtain some technical analysis knowledge before taking this strategy on.

The Forex Dual Stochastic Trade Strategy assists traders by giving them an indication when a price might be trending but it’s overextended and traders should change their position on that particular asset.  This is a strategy which might look rather simple at first glance, however beginners need to first obtain some technical analysis knowledge before taking this strategy on.

The Bladerunner Reversal

The Bladerunner Reversal strategy is widely-considered as one of the most effective forex trading strategies but yet again – it does require a certain level of experience to use.  The Bladerunner Reversal strategy is a price action strategy which aims to spot the most favourable entry points in a certain trade and is a strategy that is suitable across any currency pair.

Next on the list we take a look at Day Trading Strategies perfect for Beginners – 

The Bladerunner Reversal strategy is widely-considered as one of the most effective forex trading strategies but yet again – it does require a certain level of experience to use.  The Bladerunner Reversal strategy is a price action strategy which aims to spot the most favourable entry points in a certain trade and is a strategy that is suitable across any currency pair.

Next on the list we take a look at Day Trading Strategies perfect for Beginners – 

What is Intraday/Day Trading?

Intraday/Day trading is the buying and selling of a financial instrument within the same day or even multiple times over the course of a day

Taking advantage of small price moves can be very profitable if a trader plays their cards right. But it does carry a risk for beginners or for a matter of fact, anyone who doesn’t adhere to a well-thought-out strategy.

It must be noted that not all brokers are suited to high volume trading made by intraday/day traders. Here we will take a look at some general day trading principles and more.

Intraday/Day trading is the buying and selling of a financial instrument within the same day or even multiple times over the course of a day. Taking advantage of small price moves can be very profitable if a trader plays their cards right. But it does carry a risk for beginners or for a matter of fact, anyone who doesn’t adhere to a well-thought-out strategy.

It must be noted that not all brokers are suited to high volume trading made by intraday/day traders. Here we will take a look at some general day trading principles and more.

Basic Intraday/Day Trading Strategies

Once a trader has mastered some of the most basic techniques, developed a personal trading style, and determined what the end goal is, there are a series of strategies to help traders in their quest for profits.

Here are some popular techniques you can use:

Following the trend: Traders who follow the trend will buy when prices are rising or short sell when they drop on the assumption that prices that have been rising or falling steadily and will continue to do so.

Contrarian investing: This strategy works on the assumption that the rise in prices will reverse and drop. 

Scalping: Scalping is where a speculator exploits small price gaps created by the bid-ask spread. This technique normally involves entering and exiting a position quickly—within minutes or even seconds.

Trading the news: Investors will buy when good news is broadcasted or short sell when there’s bad news. This can lead to greater volatility and higher profits or losses.

Intraday/Day trading is slightly more difficult to master and it requires time, skill, and discipline and above all, much more screen time. It is also way more stressful than trading the longer time-frame strategies because it demands all your attention while you are in the trade. 

Once a trader has mastered some of the most basic techniques, developed a personal trading style, and determined what the end goal is, there are a series of strategies to help traders in their quest for profits.

Here are some popular techniques you can use:

Following the trend: Traders who follow the trend will buy when prices are rising or short sell when they drop on the assumption that prices that have been rising or falling steadily and will continue to do so.

Contrarian investing: This strategy works on the assumption that the rise in prices will reverse and drop. 

Scalping: Scalping is where a speculator exploits small price gaps created by the bid-ask spread. This technique normally involves entering and exiting a position quickly—within minutes or even seconds.

Trading the news: Investors will buy when good news is broadcasted or short sell when there’s bad news. This can lead to greater volatility and higher profits or losses.

Intraday/Day trading is slightly more difficult to master and it requires time, skill, and discipline and above all, much more screen time. It is also way more stressful than trading the longer time-frame strategies because it demands all your attention while you are in the trade. 

Designing a trading System

It might not take very long to design a system but it does take considerably more time to extensively test it.  Patience is key and a good forex trading system can potentially lead to a great profit.  Intraday/Day trading involves traders not holding their portfolio for no longer than one day. These trades take advantage of the volatility of the market. This strategy enables the trader to avoid the risk associated with large forex movements which may occur overnight.

Intraday/Day Traders will most likely be involved in five-minute to hourly trades based on their analysis of technical tools.

Time Frame

The first step when creating a system is to decide what kind of forex trader you are by asking yourself a few simple questions:

  • Are you an intraday/day or swing trader?
  • Do you like looking at charts daily, weekly, monthly, or even yearly? 
  • How long would you like to hold on to your positions?

These questions will help a trader determine which time frame they will use to trade and even though traders will still look at several time frames, this will be the main time frame a trader will use when looking for a trade signal.

Find indicators that help identify a new trend.

One of the main goals is to identify trends as early as possible by using indicators that can accomplish this.  Moving averages are one of the most popular indicators. They will use two moving averages (one slow and one fast) and wait until the fast one crosses over or under the slow one.  Moving average crossovers is the fastest and easiest way to identify new trends. 

Find indicators that help confirm the trend.

The secondary goal for a system is to have the ability to avoid “false” trends by making use of indicators which signals a new trend, including MACD, Stochastic, and RSI.

Define the Risk

When developing a forex trading system, it is extremely important that a trader defines how much they are willing to lose on each trade.  A good trader keeps in mind what they could potentially lose before thinking about how much they stand to win.  Traders need to decide how much space is enough to give a trade some breathing space, but also not risk too much on one trade. The basic rule of thumb is to not risk more than 1-2% of your capital on any one trade.

Define Entries & Exits

The next step is establishing where to enter and exit a trade in order to get the most profit.

Entries:  Some traders enter as soon as all of their indicators match up and give a positive signal, even if the candle hasn’t closed but others choose to wait until the close of the candle.

Exits:

Here, traders have a few different options.  One way is to trail a stop which means that if the price moves in a trader’s favour by ‘X’ amount, they move their stop by ‘X’ amount.  Another way to exit is to set a target, and exit when the price hits that target. Others may choose to go for the same fixed risk on every trade.

Traders must calculate their target, and stick to it! Never exit – Stick to the system!

It might not take very long to design a system but it does take considerably more time to extensively test it.  Patience is key and a good forex trading system can potentially lead to a great profit.  Intraday/Day trading involves traders not holding their portfolio for no longer than one day. These trades take advantage of the volatility of the market. This strategy enables the trader to avoid the risk associated with large forex movements which may occur overnight.

Intraday/Day Traders will most likely be involved in five-minute to hourly trades based on their analysis of technical tools.

Time Frame

The first step when creating a system is to decide what kind of forex trader you are by asking yourself a few simple questions:

  • Are you an intraday/day or swing trader?
  • Do you like looking at charts daily, weekly, monthly, or even yearly? 
  • How long would you like to hold on to your positions?

These questions will help a trader determine which time frame they will use to trade and even though traders will still look at several time frames, this will be the main time frame a trader will use when looking for a trade signal.

Find indicators that help identify a new trend.

One of the main goals is to identify trends as early as possible by using indicators that can accomplish this.  Moving averages are one of the most popular indicators. They will use two moving averages (one slow and one fast) and wait until the fast one crosses over or under the slow one.  Moving average crossovers is the fastest and easiest way to identify new trends. 

Find indicators that help confirm the trend.

The secondary goal for a system is to have the ability to avoid “false” trends by making use of indicators which signals a new trend, including MACD, Stochastic, and RSI.

Define the Risk

When developing a forex trading system, it is extremely important that a trader defines how much they are willing to lose on each trade.  A good trader keeps in mind what they could potentially lose before thinking about how much they stand to win.  Traders need to decide how much space is enough to give a trade some breathing space, but also not risk too much on one trade. The basic rule of thumb is to not risk more than 1-2% of your capital on any one trade.

Define Entries & Exits

The next step is establishing where to enter and exit a trade in order to get the most profit.

Entries:  Some traders enter as soon as all of their indicators match up and give a positive signal, even if the candle hasn’t closed but others choose to wait until the close of the candle.

Exits:

Here, traders have a few different options.  One way is to trail a stop which means that if the price moves in a trader’s favour by ‘X’ amount, they move their stop by ‘X’ amount.  Another way to exit is to set a target, and exit when the price hits that target. Others may choose to go for the same fixed risk on every trade.

Traders must calculate their target, and stick to it! Never exit – Stick to the system!

Write down the system rules and follow it

This, by far, is the most important step in creating a trading system. Traders must write down their trading system rules and always follow it.  Discipline is one of the most important characteristics of a trader. The system will never work if a traders doesn’t stick to the rules.

How to Test A Forex Trading System

The fastest way to test a system is to find a charting software package where a trader can go back in time and move the chart forward one candle at a time.

When a trader moves their chart forward one candle at a time, they can follow their trading system rules and make their trades accordingly.  Traders must record their trading record, and be honest with themselves at all times – Record wins, losses, average win, and average loss.

The next step will be to trade a system live on a demo account for at least two months.  This will give traders a feel for their system when the market is moving. After two months of trading live on a demo account, traders will see if their system can truly stand its ground.  If a system brings good results, traders can choose to trade their system live on a real account.

The fastest way to test a system is to find a charting software package where a trader can go back in time and move the chart forward one candle at a time.  When a trader moves their chart forward one candle at a time, they can follow their trading system rules and make their trades accordingly.  Traders must record their trading record, and be honest with themselves at all times – Record wins, losses, average win, and average loss.

The next step will be to trade a system live on a demo account for at least two months.  This will give traders a feel for their system when the market is moving. After two months of trading live on a demo account, traders will see if their system can truly stand its ground.  If a system brings good results, traders can choose to trade their system live on a real account.

In Conclusion

While there are multiple methods of trading, the strategies mentioned above have been tried and tested in the past, and has an excellent track record. While different strategies do exist, traders need to assess them and find which works best for them individually. 

When a trader moves their chart forward one candle at a time, they can follow their trading system rules and make their trades accordingly.  Traders must record their trading record, and be honest with themselves at all times – Record wins, losses, average win, and average loss.

The next step will be to trade a system live on a demo account for at least two months.  This will give traders a feel for their system when the market is moving. After two months of trading live on a demo account, traders will see if their system can truly stand its ground.  If a system brings good results, traders can choose to trade their system live on a real account.

While there are multiple methods of trading, the strategies mentioned above have been tried and tested in the past, and has an excellent track record. While different strategies do exist, traders need to assess them and find which works best for them individually. 

When a trader picks a strategy to trade with, they have to do so by not only considering their level of knowledge in forex but also by doing their own market research.  The strategies we have listed can be good for beginners, and professionals alike.  Traders should always start off with the basics.  Keep in mind – everything might seem simple to start, but never underestimate the market and learn each step carefully.

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