Forex Strategies for Novice Trader 2020
If you are a beginner in Forex, then it would be wise to be careful in choosing a Forex trading strategy that you will use when starting your trading journey. Data recently released by the largest Forex / CFD brokers according to European Union regulations shows that nearly 70% of Forex traders who trade CFDs lose money in the long run, and the main reason why most traders lose money is a bad and unrealistic option to a strategy Forex
As a new Forex trader, you can help shift the odds to your advantage by choosing a good beginner Forex strategy. The article below outlines some effective and simple Forex strategies that require only one technical indicator. You can trade these strategies with any of the DailyForex's highest rated Forex / CFDs.
Best Forex Trading Strategies for Beginners. Forex trading strategies best suited for beginners have the following characteristics, which are not easy to find together:
Profitable / reliable
Simple/easy to follow
The rules are clear
Useful as an aid to learning
Use higher time frames
The lowest possible number of indicators
There are often great claims to a large number of trading strategies, but the only trading strategy that has clear and reliably profitable rules, in the long run, is one that relies on following trend or principles of momentum as a single category, and average bounce strategies like the other (meaning bounce when price tends to To return to its average value). There are many other strategies that rely on different quirks or basic or emotional criteria, but either tend to not be profitable in the long run, or they are very complex and require more self-esteem than a beginner can safely implement.
It is also important that the new trader not experience significant losses, however temporary, as this can be psychologically damaging even for expert traders. This is why the best forex trading strategies for beginners allow for minimal risk and small position sizes.
The time frame is also important, as the main reason why most novice Forex traders fail is to encourage them to trade on shorter time frames. Trading profitably with shorter time frames is a skill acquired, so it is best for beginners to adhere to using daily charts and perhaps use 4-hour or 1-hour charts at the same time to find more accurate and low-risk entry trade points. Of course, beginners may not have much time for forex trading, or want to get used to it slowly, which is another reason why trading strategies shown here may trade on daily or weekly time frames only. This means that it only takes a few minutes of your time once a day or weekly to trade it.
The final factor in determining a good beginner trading strategy is whether the strategy provides space for learning. The novice trader should be able to learn by using a Forex strategy with positive expectations, but the strategy must offer more than just pressing buttons according to specific rules. The best way to achieve this is for the strategy to have clear rules laid down for the novice trader in order to record his optimism about each trade before it is taken once it has some experience in using the strategy. After that, i.e. after 20 trades, for example, a trader can check his records to see if his expectations match the outcome of the deals. Once the beginner trader proves the ability to correctly determine in advance the trade that is likely to convert better, he may decide to risk more in favored trades, or not to enter into unfavorable trades. In this way, the new trader can build his trading skills while still trading and hoping to make money.
The best way to start is to identify some simple trading strategies that have a good track record of success in Forex.
The best simple trading strategies
The best simple trading strategies for beginners are supposed to be technical strategies based on either the Momentum Principle or the Bounce-Average principles, ease of follow-up, and being conservative. In this section, I will explain detailed rules of some trading strategies that new traders can use to make profits and improve trading.
Forex strategy for 50 days
It has been proven through academic research that the price movement of liquid financial instruments shows the effect of momentum. This means that when prices move strongly in one direction, this directional movement is likely to continue in the short term rather than in the opposite direction. Also, it is possible that any other movement in the same direction is stronger than any movement in the opposite direction.
We can use this momentum property to see that when prices break into new long-term highs or lows, we have an advantage in our favor that we can use to make a profit.
We must make sure that this rule applies only to more liquid Forex currency pairs, as if we have been checking historical performance over the past twenty years or so, we can see that currency pairs whose most profitable breakthroughs in this way are EUR / USD pairs And the US dollar / Japanese yen. So you should only trade these two currency pairs when using this Forex strategy. This may seem excessively restricted, but trading these two pairs will give you exposure to the three major global currencies which make up almost the majority of the global Forex volume, as 41% of all Forex transactions that take place globally fall within these two currency pairs, while the dollar The US is a party to about 80% of world trade by volume.
Only trade in EUR / USD and USD / JPY cross.
Monitor the daily chart for the entry signal, the new highest price in 50 days or the new close price, the lowest for 50 days. Just count 50 candles to the left if you think you see a new high or low closing price. The horizontal line graph tool can be used to check this in almost all graphic packages. The closing price should be higher or lower than all the previous 50 closing prices, and not above or below the prices achieved by the previous candle wicks.
Entry Signal: The new highest closing price for 50 days is an indication of entering into a long position. The new lowest closing price for 50 days is a signal to enter a short position.
Trading entry: If you are trading only on the daily time frame (which is something we recommend), you should enter trading immediately after creating the entry signal.
Risk / position size / leverage:
You should only take a maximum of 0.25% of your account balance in a trading position. If you implement this forex position setting strategy, this means that if you have $ 2000 in your account, you have to risk $ 5 in trading. Divide this amount by the stop loss you will use: in the example below, it is 50 pips, so you will know the trading volume so that you risk 10 cents per pip (in the EUR / USD pair, that will be 0.01 lots) or 1 small lot).
This should depend on the value of the ATR indicator set to 15 days. Smaller stop-loss points tend to guarantee greater overall profitability, although they also reduce the winning rate. I recommend the best balance between the two stops set to half the value of the ATR indicator. For example, if you see a new daily higher close for 50 days in the EUR / USD pair at 1.1500, and the ATR indicator has been set to show the average range over the past 15 days, it shows that at 100 points, you will use a stop loss at 50 points.
Trading management: Two days after entering trading, if trading is still open, move the stop loss to equalize. If the market price is worse than the stop loss, close trading at the market price. This is an application of the old trading principle, "Stop losing trades and allow profitable trades to work."
Trading frequency: You can have more than one deal in the same direction in the same currency pair at the same time, but since you will move the stop loss to achieve a break-even after two days, you will not have more than two deals at risk at the same time in the same currency pair.
You can simply choose between using a time-based exit, which must be between 5 and 8 days (the upper limit has historically provided the most profitable performance) after entering the trade, or a type of moving stop once the price reaches floating profit when the risk is low at least. For example, if the stop loss is set to 50 pips, you will start applying the trailing stop loss as soon as the trade reaches a profit of 100 pips.
These are the full rules of a 50-day Forex strategy. Beginner traders can trade this strategy knowing that it has performed well in recent years, but they must realize that most traders are not profitable trades - however you can expect to make more profit from trades than you lose in losing trades. She allowed some flexibility on the rules for the exit strategy, as this is an area where beginners need to do a lot of learning. Most traders find exit points difficult, as they can be psychologically difficult as well. Beginners may find it helpful to start with a strict time-based exit strategy that is placed at the end of each day to note whether or not they want to exit the deal. Then the beginner trader can compare whether a "discretionary" mindful exit strategy outperforms the time-based exit strategy after a series of deals, perhaps giving at least twenty trades a fair example. Many traders will be surprised when they find that they will get better results by just exiting after the same number of days each time, which they will achieve by trusting their belief in price movements, which indicates that it is time to exit trading. Judging the price movement yourself to launch your trading exit signal is very difficult for most people, so this is a good way you can use to exercise mentally without damaging your trading account.