Top forex trading strategies for beginners 2021

Forex is an extremely profitable market. You must have read or heard the data of the survey done by Triennial Central Bank in 2019. As per their calculation, the forex average daily volume reached $6.6 trillion in 2019. Now, you can estimate how big the forex is?

However, before entering the market, there are several things or strategies which you must read and employ while trading. They will help you to sustain and harvest massive returns. We have made it a bit simple for you by pointing out some of them in the given article.

Forex trading strategies #1 Position trading

Position trading is the most popular and commonly employed trading technique where a trader holds a trading position in a currency pair for an extended period of time. Usually, this period lies between several months and years. Position investors usually ignore short-term price shifts to gain from longer-term trends.

Now, let's look at some advantages and setbacks of position trading:

Advantages:

1. If you are employing a position trading strategy, then there is no need to spend much of your time monitoring trades. All the trades in this technique are longer-term.

2. It provides you with a favorable risk to reward ratio on trades (probably between 1 and 5 and sometimes even more than that)

3. It is known as a stress-free trading style as you need not bother about short-term price shifts.

Disadvantages:

1. It needs a deep understanding of market fundamentals affecting trades.

2. In position trading, your stop-loss is greater. Hence you require larger funds to stay in the market.

3. It may not result in larger returns every year. The major reason behind this is the low number of orders.

You must have heard about the trend following trading strategy. It is more or less similar to position trading. The major and only difference between them, trend following is entirely a technical approach that does not employ any fundamentals.

Forex trading strategies #2 Swing trading

Swing trading is a trading strategy in which a trader tries to grab short and medium-term profits in a currency pair over several days to several weeks. These traders usually use technical analysis tools to service for trading opportunities.

Now, let's look at some advantages and setbacks of swing trading:

Advantages:

1. This technique's significant advantage is that you do not require to quit or exit your full-time job to become a swing trader.

2. Unlike position trading, it generates significant returns every year as here you have numerous trading opportunities.

Disadvantages:

1. With this approach, you cannot sail through larger trends.

2. The trading positions are exposed to greater overnight risk.

Forex trading strategies #3 Day trading

Day trading is a strategy where traders sell and buy currency pairs within the same trading day. They close all these trading positions before closing the financial market to eliminate unnecessary risks and negative price gaps. A negative price gap refers to the difference in the price of one trading day's close and the following day's cost at the open.

Now, let's look at some advantages and setbacks of day trading:

Advantages:

1. If you master this day trading technique, you can make gains for most months.

2. Unlike swing trading, you are not exposed to high overnight risk because all positions are closed by the end of the trading day.

Disadvantages:

1. It is stressful then both position and swing trading as you require to sit right in front of your pc or device to monitor market moves.

2. You can lose most of your hard-earned money if you face massive slippage.

3. It can lead to a huge loss (of opportunity cost) as it requires continuous monitoring and you have to quit your full-time salary.

Forex trading strategies #4 Scalping

Scalping is a short-term trading technique. It is even smaller than that of other kinds of trading style such as day trading. It is named such because investors who employ this style are referred to as scalpers. They swiftly exit and enter the financial market to grab smaller profits from a large number of trading orders throughout the day.

Now, let's look at some advantages and setbacks of scalping:

Advantages:

1. In scalping, there are numerous trading opportunities every day

2. It can lead to healthy income from forex trading

Disadvantages:

1. It involves high financial cost, including connection, newsfeed, paying your software and several others.

2. It is extremely stressful.

3. It requires you to stick to the computer screen every time.

Forex trading strategies #5 Transition trading

The entire idea of transition trading strategy is to enter a trading position on a smaller time frame. If the financial market turns in your favour, you can enhance your returns or employ stop loss in case the conditions turn against you.

Now, let's look at some advantages and setbacks of transition trading:

Advantages:

1. Here, there are huge chances to get an excellent risk to reward ratio, likely between 1 and 1 or more than this.

2. It can mitigate risk to a larger extent as you enter the trade on a lower time frame.

Disadvantages:

1. You receive good returns on only a handful of trades.

2. Before thinking about transition trading, you are required to go through multiple time frames deeply.

The Bottom Line

Trades usually ask which forex trading strategy is best for them. There is no definite answer to this. Position trading is a wealth-generating technique for those traders who do not wish to spend the whole day looking at screens. Swing trading is for those traders who can speed hours monitoring the trade each day. Scalping and day trading is for those who can sit in front of a computer the whole day.

So, before choosing any strategies, the main point is to properly read the related pros and cons. Then make a decision based on several points: how much time you have for monitoring your trades, what are your trading objectives and whether the technique fits your personality or not. Along with the strategy selection, the choice of broker is also a vital aspect. So, choose the top and reliable broker such as Brokereo to make your trading journey easy going and affordable.

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