Free & Simple FOREX Trading Strategies
Trading the financial markets is a challenging endeavor and takes much experience to do well. Consistent profits only come from an intrinsic understanding of how the markets fluctuate, and this cannot be learned quickly. However, many of the most effective trading strategies are based on simple concepts. If trading the foreign currency exchange market (Forex), you can kickstart the learning curve with some free and simple methods.
Other People Are Reading
-
Trend Reversal
-
A trend is a continuous price move in one general direction. Trends are powerful forces that lead prices significantly higher or lower over time. But all trends do eventually come to an end. When a trend is underway, it is tempting to join the trend. But if you participate in a trend near the end of its life, the losses can be sharp and significant should the trend reverse. Instead, consider waiting for signs of a reversal, then join the new counter-trend. Buying at the end of a down trend, for example, can be a great trade entry. Use a trend line on the chart to determine the reversal. For a down trend, draw a straight line connecting the high points of the trend. When prices fluctuate above this line, the trend may be ending. Consider buying into this market.
Candlestick Strategies
-
A candlestick is a chart type available in most Forex trading platforms. It builds upon the conventional bar chart to more clearly show the opening and closing prices for a time period. Forex traders often pay attention to the patterns on candlestick charts. There are dozens of these patterns to learn, but start with simple strategies first. The hammer or pin bar is one of these patterns, and it often signals a trend reversal. This candlestick shape consists of a short body, the rectangular component of the candlestick, situated at the top of the candlestick. A long wick, or thin vertical line, extends below the body. The candlestick alone shows that prices fluctuated lower over the period, but rose to end near where they opened. In a down trend, such a signal suggests that further price declines are less likely, and market forces may be shifting towards the buy-side. If you buy when you see these signals, you may be among the first to participate in a new up trend, leading to higher prices.
-
Moving Average Strategies
-
A "moving average" is a technical indicator that you apply directly to a price chart. It shows how the average price over a period of time changes as new prices occur. Many strategies involve moving average lines. One way to use the moving average is similar to a trend line. If the average is sloped upward, consider the trend as rising. When prices fall back towards the moving average, this present a low-risk entry into the trend. Should it continue, prices will "bounce" off this line and continue higher. This is a simple strategy that can work well, but you must first observe the particular Forex currency you trade as all currencies have different behavior.
Considerations
-
While trading methods are often straightforward, the risks of Forex trading are high and can lead to quick losses. Often, the key to success involves a lot more than a good trading strategy. You also must know how to manage your capital. Learn not to place too much money in one trade. Also, experiment with your exit strategies. Some traders hold onto trades for a predetermined profit. Others wait for clues about changing market conditions before exiting. These techniques are often as important as the entry strategy itself, if not more so.
-
