Trading strategies for beginners
The Forex market is chock-full of hundreds of trading systems and strategies, but there still remains a burning question: Which are the most useful Forex trading strategies for beginners? In fact, it is a question that even many experienced traders find difficult to answer.
It has often been said that it is easier for a new trader to earn consistent profits than it is for one who has been making unsuccessful trades for years. There is a very simple reason for this: A beginner has not yet had the time to develop bad trading habits. However, a trader who has been struggling in the currency markets for years, not only has to find a Forex strategy that will work for them, but also has to un-learn any bad habits they have picked up.
Another factor is that a beginner can easily pick up trading strategies since they are not yet set in their trading ways. Here we look at some price action Forex trading strategies that every beginner needs to learn and master.
The Pin Bar Forex Trading Strategy
The pin bar is a single-candlestick pattern and one of the best Forex trading strategies for beginners, identifiable by a small body and long wick. Typically, the pin bar’s wicks are longer than its body. The pattern seen on an asset’s price chart is characterized by a candlestick with a small body and a much longer wick, either on its upper or lower side.
Pin bar patterns are the result of currency pair values being tested by the market and then being rejected. This is clearly depicted by the long wick that is left by the pin bar. Although it is possible for the pin bar to appear anywhere on a price chart, it is considered a strong signal when these pin bars form near support and resistance levels.
When considered within the larger context of Forex trading, it is easy to identify pin bars, which offer great insights to traders. They let traders know that a price reversal is likely to happen. In addition, they are best traded in conjunction with an existing system based on price action strategies including Fibonacci levels, support/resistance levels or trend lines.
Inside Bar Trading Strategy
The system based on the so-called ‘Inside Bar’ is one of the popular Forex trading strategies for beginners, which only needs two candlesticks to present itself; the pattern plays directly on the sentiment existing over the short-term as traders seek to enter trades before potential big price moves. The ‘Inside Bar’ gets its name from the fact that the candlestick’s price action is completely covered by the price action from the previous day or session.
Many traders consider inside bars as a reversal pattern. The hypothesis is that after the price has been trending for an extended period, the apparent ‘pause’ shown in the price movement (the inside bar) comes before a reversal of the trend. Because of this, the strategy is considered by traders who want to hold trades for less than ten bars in a counter-trend direction.
Breakout Trading Strategy for Forex
Any kind of breakout in the market is a reflection of the reaction of market players with regard to buying or selling. Breakout strategies used in Forex trading offer traders signals that show when to enter the market. By making the right move, a trader will profit from riding on a strong trend.
The kinds of breakouts that traders look for when using this strategy include those involving:
- trend lines
- support/resistances zones
- volatility levels
- and price channels.
When a beginner follows a daily Forex breakout strategy, volume and other indicators can provide highly reliable trading signals.
There are a variety of effective Forex trading strategies for beginners so take the time to learn more about the financial markets and test your strategies on a demo trading account before you step into the trading arena.