Simple strategy trade forex

By: Frank007 Date: 15.07.2017

We use cookies to give you the best possible experience on our website. By continuing to browse this site, you give consent for cookies to be used. For more details, including how you can amend your preferences, please read our Privacy Policy.

The Forex market is hugely liquid, with a vast number of participants. It is also a well-established market. As you might expect, this combination of popularity and time has resulted in traders devising countless strategies. As a newcomer, the sheer volume of trading techniques available can be daunting and confusing. Some strategies are very complicated, with a steep learning curve. So beginners may find it better to start with a simple Forex strategy.

After all, the simpler the strategy, the easier it is to understand the underlying concepts. There will be plenty of time to add complex actions after you have mastered the basics. Regardless of whether you adopt a simple or complex strategy, remember that your overarching mantra should always be to use what works. New traders are generally unable to devote large amounts of time to monitoring developments.

For these newcomers to Forex, simple strategies offer an effective but low-maintenance approach. This article will introduce some simple Forex trading strategies. You can also pick up new strategies from our free webinars. The first two strategies we will show you, are fairly similar because they attempt to follow trends.

The third strategy attempts to profit from interest rate differentials, rather than market direction. To put it simply, a trend is the tendency for a market to continue moving in a given overall direction. A trend-following system attempts to produce buy and sell signals, that align with the formation of new trends.

simple strategy trade forex

There are many methods designed to identify when a trend starts and ends. And many of the simple Forex trading strategies that work have similar methods.

Trend following can produce large profits. In fact, there are traders who have produced outstanding track records using such systems. This means that the strategy tends to generate numerous losing trades.

The theory is that these losses will be offset by more infrequent but larger winning trades. Also, once the trend breaks down, you tend to give back a healthy amount of your profit. You may have heard the phrase, " the trend is your friend ". But you may not be so familiar with the full expression, which adds "until the end".

One big issue with a trend-following system, is that you need deep pockets to properly use it. This is because having a large amount of capital, reduces your chances of going bust during an extended drawdown. So, trend following is useful as a Forex strategy for beginners to understand, but it may not be ideal for less wealthy beginners. The first strategy attempts to identify when a trend might be forming.

It looks for price breakouts. Markets sometimes range between bands of support and resistance. This is known as consolidation. A breakout is when the market market moves beyond the boundaries of its consolidation, to new highs or lows. When a new trend occurs, a breakout must occur first. But the trouble is, not all breakouts result in new trends.

In Forex, even such simple strategy must consider risk management. By doing so, you seek to minimise your losses during the trend break-down. A new high indicates the possibility that an upward trend is beginning, and a new low indicates that a downward trend is beginning. So how can we get a feel for the type of trend we are entering? The length of the period can help determine the highest high or the lowest low.

A breakout beyond the highest high or lowest low for a longer period suggests a longer trend. A breakout for a short period suggests a short-term trend. In other words, you can tune a breakout strategy to react more quickly or more slowly to the formation of a trend. Reacting more quickly allows you to ride a trend earlier in the curve but may result in following more shorter-term trends.

So let's looks at a reasonably long-term breakout strategy. The buy signal is when the price breaks out above the day high. And the sell signal is when the price breaks out below the day low.

This is very simple, but there is still a major drawback. Namely, new highs may not result in a new uptrend, and new lows may not result in a new downtrend. Using a stop-loss can help alleviate this problem. To keep things really simple, here's an extremely basic rule for exiting trades.

We are going to take a time-based approach. You simply close your position after a certain number of days have elapsed.

This time-based exit side-steps the issue of things becoming tricky when the trend begins to break down. Once you enter a trade, hold it for 80 days and then exit. If you find these parameters do not yield enough frequent signals, they can be adjusted to whatever suits you best. For example, you can try using hours instead of days for a shorter strategy. Backtesting your results will give you a feel for the effectiveness of your choices.

MetaTrader 4 Supreme Edition offers backtesting, along with a large selection of other useful tools. Our second Forex strategy for beginners, uses a simple moving average SMA.

SMA is a lagging indicator that uses older price data that most strategies and moves more slowly than the current market price. The longer the period over which the SMA is averaged, the slower it moves. Often, we use a longer SMA in conjunction with a shorter SMA. For this simple Forex strategy, we are going to use a day moving average as our shorter SMA, and a day moving average for the longer one. In the chart above, the day moving average is the dotted red line.

You can see that it follows the actual price quite closely. The day moving average is the dotted green line. When the shorter, faster SMA crosses the longer one, it indicates a change in the trend.

When the short SMA moves above the longer SMA, it means newer prices are higher than older ones. When the short SMA moves below the longer SMA, it suggests a bearish trend and is our sell signal. Rather than solely being used to generate trading signals, moving averages are often used as confirmations of overall trend.

The 10 Best Forex Strategies - AuthenticFX

This means we can combine these two strategies by using the confirmatory aspect of our SMA to make our breakout signals more effective. With this combined strategy, we discard breakout signals that don't match the overall trend indicated by our moving averages. If we get a buy signal from our breakout, we look to see if the short SMA is above the long SMA. If it is, we place our trade.

Our final strategy is essential to know. It's a type of trade that is widely used by professionals too, so it is not purely a beginner Forex strategy. Best of all, it is easy to implement and understand. The essence of the carry trade is to profit from the difference in yield between two currencies. To understand the principles involved, let's first consider someone who physically converts currency.

Imagine a trader borrows a sum of Japanese yen. Because the benchmark Japanese interest rate is extremely low effectively zero at the time of writing , the cost of holding this debt is negligible. The trader then exchanges the yen into Canadian dollars and invests the proceeds in a government bond, which yields 0.

simple strategy trade forex

The interest received on the bond, should exceed the cost of financing the yen debt. Obviously a currency risk is baked into the trade. If the yen appreciated enough against the Canadian dollar, the trader would end up losing money.

The same principles apply when trading FX, but you have the convenience of it all being in one trade. If you buy a currency pair where the first-named base currency has a sufficiently high interest rate, in relation to the second-named quote currency, then your account will receive funds from the positive swap rate. The amount yielded is correlated to the amount of currency commanded, so leverage is an aid if the strategy pays off. As noted earlier, though, there is an inherent risk that you end up on the wrong side of a move in the currency pair.

Inertia is your friend with this strategy and ideally you are looking for a low volatility FX pair. It's also important to note that leverage will end up magnifying losses if you get it wrong. The Japanese yen has long been popular as the funding currency because Japanese rates have been low for so long, and the currency is perceived as stable.

The strategy works well at a time of buoyant risk appetite because people tend to seek out higher-yielding assets.

K.I.S.S. - ‘Keep it Simple Stupid Forex Trading Method' » Learn To Trade

The action of traders implementing the strategy can itself support the strategy because the more people using the strategy, the greater the selling pressure on the funding currency. But, there's a current problem. The global low interest environment, has narrowed interest rate differentials.

When risk appetite collapsed during the credit crunch, many fingers got burned as funds flowed into the safe haven of the Japanese yen. With the Fed signalling its intention to tighten monetary policy in the future, we may yet find the carry trade coming back into favour. We hope you have found this introductory guide to Forex trading strategies for beginners useful. After all, anyone can follow these guides. Just bear in mind that the examples we have shared primarily aim to get you thinking about the principles involved.

Don't follow a strategy without first testing it out. Feel free to put your strategies to the test with our risk-free demo trading account.

And don't forget to regularly check our Education section for more free insights and best practices. Trading foreign exchange or contracts for differences on margin carries a high level of risk, and may not be suitable for all investors. There is a possibility that you may sustain a loss equal to or greater than your entire investment. Therefore, you should not invest or risk money that you cannot afford to lose. You should ensure you understand all of the risks.

Before using Admiral Markets UK Ltd services please acknowledge the risks associated with trading. The content of this Website must not be construed as personal advice. Admiral Markets UK Ltd recommends you seek advice from an independent financial advisor.

Admiral Markets UK Ltd is fully owned by Admiral Markets Group AS. Admiral Markets Group AS is a holding company and its assets are a controlling equity interest in Admiral Markets AS and its subsidiaries, Admiral Markets UK Ltd and Admiral Markets Pty. All references on this site to 'Admiral Markets' refer to Admiral Markets UK Ltd and subsidiaries of Admiral Markets Group AS.

Admiral Markets UK Ltd. Clare Street, London EC3N 1LQ, UK. About Us Why Us? Regulatory Authorisation Admiral Markets UK Ltd is regulated by the Financial Conduct Authority in UK. Contact Us Leave feedback, ask questions, drop by our office or simply call us. Partnership Enhance your profitability with Admiral Markets - your trusted and preferred trading partner. Careers We are always on the lookout to add new talent to our international team.

Press Centre Get the latest Admiral Markets press releases and find our media contacts in one place, whenever you want them Order execution quality Read about our technologies and see our monthly execution quality report. Account Types Choose an account that suits you best and start trading today. Top products Forex Commodities Indices Shares Bonds. Contract Specifications Margin requirements Volatility Protection.

Learn more about this plugin and its innovative features. MT4 WebTrader Use MT4 web trading with any computer or browser no download necessary. Fundamental Analysis Economic events influence the market in many ways. Find out how upcoming events are likely to impact your positions. Technical Analysis Charts may show the trend, but analysis of indicators and patterns by experts forecast them.

See what the statistics say. Forex Calendar This tool helps traders keep track of important financial announcements that may affect the economy and price movements. Autochartist Helps you set market-appropriate exit levels by understanding expected volatility, impact of economic events on the market and much more. Trader's Blog Follow our blog to get the latest market updates from professional traders.

Market Heat Map See who are the top daily movers.

Movement on the market always attracts interest from the trading community. Market Sentiment Those widgets help you see the correlation between long and short positions held by other traders. Learn the basics or get weekly expert insights. FAQ Get your answers to the frequently asked questions about our services and financial trading.

Trader's Glossary Financial markets have their own lingo. Learn the terms, because misunderstanding can cost you money. Held by trading professionals. Risk Management Risk management can prevent large losses in Forex and CFD trading. Learn best-practice risk and trade management, for successful Forex and CFD trades. Zero to Hero Start your road to improvement today. Our free Zero to Hero program will navigate you through the maze of Forex trading.

4 Forex Successful trading Strategies,

Forex Have you ever fancied giving trading a go? Check out our free online Forex education course and learn to trade in just 3 steps! Admiral Club Earn cash rewards on your Forex and CFD trading with Admiral Club points. Play for fun, learn for real with this trading championship.

Forex Trading Strategy • Price Action Strategy

Personal Offer If you are willing to trade with us, we are willing to make you a competitive offer. About Us About Us Why Us? Simple Forex Trading Strategies for Beginners. Android App MT4 for your Android device. MT4 WebTrader Trade in your browser. MetaTrader 5 The next-gen.

MT4 for OS X MetaTrader 4 for your Mac. Forex and CFD trading may result in losses that exceed your deposits. Please ensure you understand the risks involved. Regulatory Authorisation Contact Us News Testimonials Partnership Careers Press Centre Order execution quality. Products Forex Commodities Indices Shares Bonds Contract Specifications Margin requirements Volatility Protection. Platforms MetaTrader 4 MT4 Supreme Edition MT4 WebTrader MetaTrader 5.

Analytics Fundamental Analysis Technical Analysis Wave Analysis Forex Calendar Autochartist Trader's Blog Market Heat Map Market Sentiment.

inserted by FC2 system