For beginners in the forex market, it becomes daunting to trade, and they start searching for the best plan, to begin with. Every trader has their style of trading, and accordingly, they select their strategy.
Most market traders are aware of the volatility of the forex market, and it requires the best strategy for the desired results. For this, they analyse and search the market to have the best forex trading strategy.
Here, we have explained one of the best forex strategies that beginners could use for a favourable trade from the list of effective forex trading strategies given below:
- Trend Trading
- Position Trading
- Range Trading
- News Trading
- Swing Trading
- Scalping
- Day Trading
- Retracement Trading
- Grid Trading
Trend Trading Strategy
Trend trading strategy is the most used forex trading technique due to its easy appliance and trading predictions. Beginners in the forex market are at the first step and do not have much knowledge about the financial markets and their operations.
They do not possess much market understanding or have a trading style of their own. In such cases, going with a trend trading strategy in the forex market is the best solution.
Which is why it is termed the best forex trading strategy for beginners. The strategy includes technical indicators that identify the market direction and help traders invest.
One can trade long or short depending on the direction of the market momentum.
Understanding Trend Trading Strategy
Being the most reliable trading strategy, trend trading is based on the direction of the currency market price. To execute this perfectly, traders identify the trend direction, duration, and strength.
These factors help traders know whether the impact of a trend is strong or weak. In addition, this gives when there is going to be a reversal or breakout in the market.
However, a trader is not required to be aware of the exact market direction or the reversal timing. The traders should know when they can exit the trade to lock their market profits and reduce the loss.
The forex market is volatile and keeps experiencing small fluctuations against the market trends. This is the reason behind a trader preferring to go along with the position trading strategy.
A trader using trend trading should be able to bear some loss as the losses are surpassed by the profits as long as the trend is sustained. They can use tools and indicators to analyse the market and have successful trading.
Significance of Indicators/Tools in Trend Trading
The basic assumption of the trading strategy is that the forex market works in a certain manner. These expected ways are studied by traders for forecasts using the historical market trends and price movements of the instruments.
However, a trader going with any trading strategy is recommended to have a risk management strategy as the dependence of the strategy on past data of the currency pairs could not always justify future price movements.
A trader can have various trading indicators to analyse the market trends of the forex market. These indicators help traders determine the market strengths; some of the best tools used by traders are:
- Simple moving average
- Exponential moving average
- Average directional index
- Moving average convergence/divergence
These lagging indicators help traders know the price movements based on the previous price data.
Moreover, the indicators are great to know the market support and resistance levels. Trend traders use the signals provided by these tools as a sign of exit from the market rather than anticipating the direction.
Even the price momentum also changes over time, and to overcome this; traders use momentum indicators as support to identify the exit points of the market. Some of the momentum indicators are the relative strength index and the stochastic oscillator.
Pros and Cons
To understand the strategy better, we have listed the pros and cons of the trend trading strategy. This will help know the strategy with a quick overview:
Pros:
- A consistent and reliable strategy
- Helps to know the strength and weaknesses of the market
- Identify the price direction
- Easy to use
Cons:
- Uses past price data
Conclusion
Trend trading is the best forex strategy for beginners in the market because of its easy use. The article has described the forex trading strategy with its most useful indicators.
A trader can trade with the strategy and analyse the market momentum. It is easily available with online forex brokers such as IronFX. Moreover, the best services and regulations make them a good choice, without any IronFX scam.