Penny Stocks

Basic Trading Strategies

The Forex market is an excellent option for anyone who wants to make
money. But, if you are one of those traders who looks for the ‘Holy Grail’ in
the Forex market, you are not going to find it. The Forex market doesn’t have
a ‘Holy Grail,’ so if you want to earn, you must work for it. The most
common problem faced by naïve traders is that they are unable to understand
basic trading strategies. Hence, when trading they struggle a lot and finally,
they end up losing money. Generally, Forex trading is all about self-learning;
you will not be guided by anyone. So, you must enter the market only after
accepting this factor. If you are not ready to learn the market, you will not be
able to trade successfully. However, I’ll help you understand the basic trading
strategies in the Forex market.
Trend
One of the simple strategies that you must consider is the trend. If you
understand the trend, you will be able to manage to trade for some time until
you master other trading strategies. If you are through with trend trading, you
don’t have to face difficulties when opening a position. You will find long,
short, and medium trends in the market. Hence, before you begin trading,
decide on your strategy. Based on the strategy, the trading chart must be
selected, and remember, the trend is your friend until you treat it that way.
What if you come across a downward trend? You must remain calm until
price recovery occurs.
Support and Resistance Levels
You must understand support and resistance levels. You will not be able to
understand trading unless you understand support and resistance levels. It is
recommended to purchase near support and sell near resistance levels. You
will find the resistance levels near the previous high. However, if a resistance
level is broken, it turns into a support level and vice-versa. If you want to
trade Forex, you must have proper knowledge of support and resistance
levels.
Breakout
You have to expect breakouts when the market goes above the consolidation
boundaries. The market will reach different highs or lows. If you are finding
a new trend, it means there has been a breakout previously. So, now, you can
consider breakout as a signal to indicate a new trend occurrence. Yet, some
breakouts do not imply new trends. However, in Forex trading, even when
you are dealing with simple strategies, it is better to focus on the risk
management concept. If you are aware of risk management, you don’t have
to face huge losses. Instead, you’ll be able to manage losses.
Retracement
The retracement strategy is all about the concept that prices don’t move in a
straight line, instead stops and change the direction in the middle. Usually,
the ones who consider retracement strategy make sure to wait until the
retracement in price occurs and then look for longer price movement.
Mostly, traders consider the Fibonacci ratio for confirmation and to find the
points to enter and exit Forex trades.
Range trading
Range trading is when the trader believes that prices can be held for a specific
range within a specified period. So, range trading is possible when the
economies are predictable, and the currency value will not often change due
to sudden news. When range traders trade, they sometimes trade more than
one trading session. Both trend traders and range traders use the same tools to
find trade opportunities.
Momentum trading
Momentum trading is when the trader believes that the price trend will
continue in a particular direction for some time due to the substantial price
movement. On the other hand, weak price movement will lead to a lot of
reversals because the trend will not have the strength to perform. Both
volume and price are considered when using the momentum strategy.
Carry Trade
This is a different trading strategy that you must try. The trader will gain
benefits by considering the interest rates of different countries. The difference
between the interest rates will create a profit. The interbank interest rate will
be paid if the currency is held overnight. The trader will select the currencies
of a country that has a lower interest rate so that he or she can benefit when
exchanging with the currencies of a country that has a higher interest rate.
You might need trend trading to identify the differences accurately.
These are some of the trading strategies, but let’s discuss more in detail. Yet,
you must never try any of the strategies without testing them on a demo
account. If you use a demo account to test your strategy, you don’t have to
bear any cost. It’s free so that you can try out as many strategies you want.