Discipline is the primary trait required in forex trading, for beginners, and the foremost step in it is to follow a forex trading strategy. These investing techniques are time tested, logical, and well-reasoned. Thus, the doubt over them should be eliminated. Moreover, an investor should have firm confidence in his method, which eventually will aid him following the strategy effortlessly.
Furthermore, most people, when thinking about a forex trading strategy, they believe it as a one-way method which needs to be rigidly followed. However, several other factors, like risk management, how to enter/exit an order, position-sizing, etc. require to be considered. It is also not mandatory to follow a single strategy; one can also go with two or more combination if it works for them. For now, here are 5 best forex trading strategies in 2020 for novice traders.
Effective Forex Trading Strategy 2020 For Novices
1. Day Trading
Day trading strategy is a short term investment technique which involves closing all sessions on the same day. In other words, when a person opens his positions and closes them on the same day, then it is day trading. Moreover, it can involve one or multiple trading sessions, but usually, all the open positions are short-lived, ranging from minutes to hours.
The technique aids the users in avoiding the overnight movement risk when the client is not paying attention. There are many techniques in this method, but the most popular one is a breakout strategy. Other methods include reversal trading and pivot point strategy.
2. Swing Trading
The second technique on our list is momentum or swing trading, which works on catching significant market moves. In simple words, swing trading means to enter or exit the market in substantial market movements, i.e. extreme tops and bottom, to earn maximum profit. The methods aim to take advantage of both uptrend and downtrend. When the market is trending as well as correcting, the trader’s point is to enter the market at one extreme point and exit at the other.
Users usually look for overbought or oversold market places, from which they can maximise their benefits. Further, the trade can be closed on the same day as well as kept overnight. A simple method which most people use is selling sometime after support level and buying before resistance level.
Some usual trading indicators in this regard are MACD (Moving Average Convergence Divergence), RSI (Relative Strength Index), and candlestick charts.
3. Price Action Trading
Price action technique includes an examination of past prices to form the further trading method. It can either be used alone or with some other signal or indicator. Further, the technique’s primary focus is on technical tools and fundamental data is usually not used. However, still, the crucial factors and information should be considered before investing.
Note that there are many sub-categories in this strategy, such as range and position trading. It is advised to use several time frames in the price action to decide the entry-exit points better. The technique can be short, long, as well as mid-term, as required by the investor.
4. Position Trading
As opposed to the price action, that uses technical indicators and tools for trading, Position technique utilises fundamental signals, information, and data for investments. However, many traders use the method with some technological tools, also like Elliot Wave Theory. Meagre fluctuations in the market or price chart don’t matter much in it as the main emphasis is in a broader picture of the chart.
Position trading can be used in all market types, i.e. stocks, forex, indices, and more. Moreover, the forex trading strategy is not suitable for intraday traders and can last for as much as years; thus, catering only to persevering investors.
The advantages of the method include no need to invest much time and lucrative risk-reward ratio. However, there are very few excellent trading opportunities when using the strategy.
5. Scalp Trading
Another short term trading technique is scalping, which is quite popular in the forex market and intraday traders. The main focus of the method is on winning a large number of small profits trade. Simply, it means making a lot of trades in a day, with one single order ranging from one to thirty minutes, thus, taking small profits numerous times. The multiple opening and closing of the order can take place via a computer-generated algorithm or manually. Algorithm trading uses the guidelines given by a trader regarding when to enter and where to exit the price chart.
Currency pairs with high liquidity are generally best with this technique as it offers the most competitive spreads, thus, making the short term nature useful. The point here is to earn a lot of small pip points, in the end, accruing a lot of points in the end.
Note that despite being highly profitable, the strategy is highly risky, and a trader needs high accuracy to turn the risk-reward in your favour. The plan is simple, straightforward, and very effective if used in the right way.
So, these were the best forex trading strategies for beginners. Out of these five, choose one or make a combination of two or more of them to form your trading style, which aids you in earning. One can use a practise demo account with some good broker, like HFTrading, to start in the beginning. However, note this crucial point before choosing any other broker.
4 Top Factors For Choosing a Broker
Safety: The first and most critical point is safety, which gets further authorised by regulations and licenses. Authorisations by top financial bodies, make sure that the clients’ interest is legitimately protected, and their information, data, and funds are safe under the rigid guidelines.
The broker HFtrading, which is a trading name for the firm CTRL Investment Ltd., operates in two major nations, namely, New Zealand & Australia. The broker has licenses from the financial governing bodies of the two nations, i.e. ASIC (Australia Securities & Investment Commission) & New Zealand’s FMA (Financial Market Authority) with licence numbers 414198 and FSP197465, respectively.
The number of financial instruments available with the broker for trading is a major decider for many. Some people might be limited to trading only shares, while others would need assets from every market for trading. A good broker, like ROinvesting, offers every tradable product.
ROinvesting is a prestigious, safe brokerage firm, which offers more than 350 financial tradable products to its users. There is no commission on trading the assets, and the broker solely earns from spreads. The plus point is there are no hidden/extra charges with them.
The next essential thing to look in a broker is the facilities with payment. It includes payment options, processing time, IT security provided, and more. There should not be any compromise in this section as a little irresponsibility can come costly.
Make sure to choose a broker, like ET finance, HFtrading, or ROinvesting, which offer the number of deposit and withdrawal options to its users. One can add or take out funds via bank wire transfer, credit/debit cards, and E-wallets like Skrill, Neteller, or VPay. The processing is instant for deposits and 2-3 days for withdrawals. Moreover, the transactions are secure with IT technologies like SSL and encryption at every level.
Last but not least thing on the list is customer assistance offered by the trading site. The customer executives help in resolving queries and help the clients’ in their decision making. Good brokers’ assistants are polite, rational, and intelligent in answering the users. They should be well aware of all the related knowledge.
A trader when choosing should also consider the contact options (like email, telephone, live chat, or form) and the convenient time to connect with the broker. The more it is, the better it’s for users.
The customer support of Oinvest is one of the best. Anybody can connect with their executives from Monday to Friday, 24/5, anytime from 07:00 to 17:00 GMT.
The Bottom Line
Remember, along with forex trading strategy; a trader also needs to be serious with his studies, i.e. investment knowledge and skills. One good method to polish the skillset is by reading several journals by famous trading giants like Paul Tudor Jones and more. An investor can also go along with videos, articles, E-books, and other guides & tutorials. Moreover, mere reading is not ample; getting the theory into practice is the second most important thing.
At last, do not forget to practise before getting into forex or any trading if you’re a beginner. Using free demo account by trusted trading sites like ET finance or HFTrading is a competent methodology.