Forex trading may appear to be both difficult and dangerous. Some even believe that one cannot win in trading without the ability to comprehend complex charts. This is not to be the case . There are various profitable simple Forex strategy
Traders can learn a lot by looking at central bank interest rates and recent actions, which can have a significant impact on currency fluctuations. For longer-term trading, taking inflation into account and computing the actual interest rate can be beneficial.
Another basic Forex trading strategy is to compare market prices with Purchasing Power Parity. This can aid market players in identifying currencies that are undervalued or overvalued.
Forex Trading Strategies For Beginners
Forex Trading System
Carry trade is a well-known and straightforward Forex trading method. The main concept is to purchase high-yielding currency in exchange for low-yielding currency. The broker will pay the interest rate differential to the client as long as the position is active. A ‘rollover swap rate’ is another term for this.
Every broker may have their own prices; for example, Axiory posts the most recent updates on their website.
As a result, the trader may look at the most recent interest rates for major currencies and obtain a complete picture of current developments. Let’s look at USD/JPY and USD/RUB as examples.
The Federal Funds rate is 0.25 percent at its highest end, while the Bank of Japan retains its key interest rate at -0.1 percent. As a result, there is a 0.35 percent difference between the two. The interest rate made mandatory by the Bank of Russia is 6%. As a result, the spread between the USD and RUB exchange rates is 5.75 percent.
So, how is this going to fan out? In the case of USD/RUB, if a trader takes a short position with $10,000 and 1:10 leverage, and the broker offers a 5.75 percent rollover rate, the trader will make $15.75 each day, $472.60 per month, and $5,750 in a year. In essence, it’s the same as a 57.5 percent CD, except the principal is at risk.
It’s also worth noting that most brokers don’t offer rollovers that exactly match interest rate differentials; instead, they’re frequently a little lower. Carry traders, on the other hand, can hunt for the most competitive prices among the several possibilities available.
Simple forex trading strategy
Rates of Interest
It’s no secret, all else being equal, higher-yielding currencies appeal to traders and investors more than lower-yielding currencies. As a result, rising interest rates cause currencies to strengthen against their peers. As a result, trading prospective rate changes might be a straightforward Forex trading strategy.
So, how can we anticipate these kinds of shifts? Every major central bank in the world, for example, has a target for yearly inflation. So, by keeping an eye on the most recent Consumer Price Index, one can obtain a sense of how near it is to the goal. Major policy divergences could lead to a shift in policy.
The Reserve Bank of New Zealand, for example, has a CPI goal range of 1 to 3%. So, if the newest statistics show that the country’s inflation rate is at or over 4%, the central bank can be forced to begin raising interest rates. As a result, the New Zealand Dollar will gain in value and yield. This could be a good time to predict an increase in the New Zealand dollar against the US dollar and the Japanese yen or pairs that are similar.
Make forex easy
It’s important to remember that central banks also consider other economic indicators like unemployment and GDP growth rate.
Returning to our previous NZD example, if unemployment is very high and the country is in recession, the Reserve Bank of New Zealand may decide that a 4% CPI increase is merely a temporary event and refrain from raising interest rates. As a result, keeping an eye on other economic indicators is always beneficial.
Easy Forex Strategies
TRADING PRICE ACTION
The study of historical prices is used to develop technical trading methods in price action trading. Price action can be used independently or in combination with an indication. The fundamentals are rarely employed; Economic events, on the other hand, are hardly unheard of as a substantiating factor. As shown above, there are various more tactics that fit under the price action category.
Trade duration: Price action trading can be used over a variety of time frames (long, medium and short-term). Many traders prefer price action trading because it allows them to analyze multiple time frames.
Points of entry/exit: There are a variety of approaches for determining support and resistance levels, which are commonly used as entrance and exit points:
Fibonacci retracement
Using candle wicks
Trend identification
Indicators
Oscillators
Range, trend, day, scalping, swing, plus position trading are all types of price action trading. These techniques comply to a variety of trading restrictions, which will be discussed in greater detail further down. The examples demonstrate a number of trading tactics for various methods, as well as a range of customizable alternatives for traders to pick from.
STRATEGY FOR RANGE TRADING
Identifying support and resistance points, as well as placing trades around these crucial levels, is part of range trading. In markets with little volatility and no obvious trend, this method works effectively. The key instrument employed in this method is technical analysis.
Trade duration: Range bound techniques can work for any time frame, therefore there is no set length for each deal. Because breakouts can occur, risk management is an important aspect of this strategy. As a result, all current range-bound trades would be closed by a range trader.
Points of entry/exit: Oscillators are frequently employed as timing devices. Some of the more prominent oscillators are the Relative Strength Index (RSI), Commodity Channel Index (CCI), and stochastics. Price action is sometimes combined with oscillators to help confirm range-bound indications or breakouts.
TRADING STRATEGY FOR TRENDS
Many traders of all levels of experience utilize trend trading as a simple forex strategy. Trend trading aims to make money by taking advantage of a market’s directional momentum.
Trade duration: Because trends change in length, trend trading usually takes place over a medium to long time horizon. Multiple time frame analyses, like price action, can be used in trend trading.
Points of entry/exit: Exit points are generated based on a positive risk-reward ratio and are commonly marked by an oscillator (RSI, CCI, etc.). Traders can use stop level distances to either equal or exceed that distance in order to preserve a favorable risk-reward ratio, for example.
The take profit level would be set 50 pips or more away from the entry position if the stop level was set 50 pips away.
TRADING IN POSITION
Position trading is a long-term strategy that focuses on fundamental considerations, though technical tools such as Elliot Wave Theory can also be applied.
Smaller, less significant market swings are ignored in this method since they have no impact on the overall market picture. This method can be applied to any market, including stocks and currency.
Trade duration: Position trades, as previously said, have a long-term outlook (weeks, months, or even years!) and are designated for the more patient trader. In forecasting trade ideas, knowing how economic issues affect markets or having extensive technical predispositions is critical.
Points of entry/exit: Because of the entire view of the market, key levels on longer time frame charts (weekly/monthly) hold useful information for position traders. Technical analysis, like the other methodologies, can be used to determine entry and exit positions.
STRATEGY FOR DAY TRADING
Trading financial instruments inside the same trading day is known as day trading. That is, before the market closes, all positions are closed. This can be a single trade or a series of trades throughout the course of the day.
Trade duration: As long as trade is open and concluded during the trading day, trade periods can range from very short (a matter of minutes) to very short (hours).
Points of entry/exit: In the example below, traders will attempt to enter positions when the price breaks over the 8-period exponential moving average (EMA) in the trend’s direction (blue circle) and exit using a 1:1 risk-reward ratio.
STRATEGY FOR FOREX SCALPING
Scalping is a phrase used in the forex market to describe the practice of making modest profits on a regular basis. This is accomplished by repeatedly opening and closing positions throughout the day.
This can be done manually or with the help of an algorithm that follows specified standards for entering and exiting locations. The most liquid forex pairs are selected since spreads are often tighter, which fits the strategy’s short-term nature.
Trade duration: Scalping is one type of trading that involves making short-term trades with a low-profit margin, usually on lower time frames (30 minutes to 1 minute).
Points of entry/exit: The first step, like with most technical tactics, is to identify the trend. To confirm the trend, many scalpers employ indicators like the moving average. The trader can view the wider picture by using these critical trend levels on lengthier time periods.
Support and resistance bands will be formed as a result of these levels. Scalping within this range can then be attempted utilizing oscillators like the RSI on lesser time frames. To avoid big fluctuations against the trade, stops are placed a few pips away. The MACD indicator is yet another valuable tool that traders may use to begin and exit deals.
SWING TRADING
Swing trading is a speculative approach in which traders attempt to profit from both range-bound and surging markets. Traders can get into long and short positions by identifying ‘tops’ and ‘bottoms.’
Trade duration: Swing trades are classified as medium-term since positions are often held for a few hours to several days. Longer-term trends are preferred because traders can profit from the trend at various stages along the way.
Points of entry/exit: Oscillators and indicators, like the range-bound technique, can be utilized to determine the best entry/exit locations and times. Swing trading, on the other hand, applies to both trending and range-bound markets.
Forex trading system
Long-Term Breakout Trading
Most significant trends begin with new highs or lows in the market.
Buying breakouts on the chart to new highs and selling new lows is one of the easiest Forex trading methods that work.
Most traders are unable to do that because they believe they have missed a portion of the move and wish to wait for a pullback, which in strong moves never arrives, leaving them to watch the movie build up thousands of dollars while remaining out.
You can make money if you focus on long-term genuine breakouts and time your entrance with a handful of momentum indicators. The key to this easy Forex strategy is to only select levels that the market considers significant.
The Rule of Four Weeks
This is perhaps among the most straightforward and profitable Forex trading strategies. Richard Davoud Donchian, an Armenian-American commodities and futures trader, developed this simple Forex method.
This approach is entirely mechanical (and is based on the above-mentioned breakout principle) and has only one rule:
Purchase a new four-week calendar high and sell a new four-week calendar low while maintaining a market position at all times.
Buying and selling overbought and oversold stocks. We have looked at two long-term profit techniques; now we’ll look at a short-term profit strategy: Forex swing trading.
Swing trading is just attempting to profit from overbought/oversold conditions inside a big trend, which may be accomplished using simple trend lines. Due to greed and anxiety, all prices are pushed too far up or down, and you simply want to trade into these extended levels.
After you’ve found regions of support or resistance, use the Bollinger band to evaluate volatility, and then use the Stochastic to confirm the move.
You might then take your profit and go on to the next one. Swing trading is enjoyable, needs minimal discipline (since you don’t have to maintain positions for long periods of time), and can be learned in a matter of days.
Conclusion
These are by far my favorite methods and for good reason. They can quickly grow your trading account into a sizable sum if handled correctly. The best aspect is that they are really simple to comprehend and hence implement into your trading strategy. Brokers like T1Markets, ABinvesting, etc., can assist the enthusiast in that.
FAQs
What is the easiest forex strategy?
Another popular and often used forex trading approach is trend trading.
What is the best strategy for forex trading?
Scalping in forex is a popular trading strategy that focuses on minor market changes.
Is forex good for beginners?
Yes, The forex market is easily accessible, and traders can participate with just a little amount of capital.
Can you get rich by trading forex?
Yes, there is a way to profit from stock trading. Many people have gained millions of dollars only through day trading.
