Whenever there is talk of forex, people assume that it is a very complex structure of trading and is not for everyone. This notion is true to a certain extent, as forex trading cannot be initiated by all since there is high volatility and incredibly fast-paced trades, which do not suit all types of traders. In addition, complexities like technical and fundamental analysis, charting, indicators and such things can confuse a trader and frustrate him. However, despite all these complexities associated with forex trading, there are certain simple strategies that work and can be used by new traders who wish to trade forex.
These simple strategies are as follows:
- Trading with the trend
- Trading with moving averages
- Trading consolidating markets
Trading with the trend
The simplest of the strategies to trade forex is to trade with the trend ongoing in the market. Often traders lose money when they go against the trend. One can always find a currency pair, which is following a trend and therefore the forex trader only needs to spot that currency pair. It is beneficial to trade with the trend rather than go against it. Trend trading is considered the simplest, the most accurate, fun-filled, lucrative and stress-free strategy. To be doubly sure of the trends and its success rate, a trader can combine it with the candlestick trading strategy. However, a trader should understand that no trend is there in the market forever, therefore, he must be ready with a good backup strategy, in case the chosen pair enters into consolidation phase.
Trading with moving averages
Trading with moving averages give the traders the edge of locating support and resistance levels. These averages show the price levels that have been active during a particular time-period. Moving averages are used by traders in several ways. Some use it in trending markets, while others design a system around the moving averages and enter the markets when the price is below or above their preferred moving average. Still some other traders use moving averages when they cross over each other and enter the markets when there is a pull back. The popular of the moving averages are the 8, 21, 50, 150, 200 and 365; however, the usage of these depends upon the trader and his trading style.
Trading consolidating markets
Markets tend to consolidate more often than they trend. For this reason, a simple strategy that works is to learn trading the consolidating markets. In the consolidation phase, the markets become range-bound and move within a range. At this time, it is best to trade off at the levels, which are highlighted by a line drawn across the lows and highs of the consolidating market. When the prices reach the bottom, the trader should buy and when it reaches the highest level, he should sell.