So, you’ve made a decision to change your life drastically and become a trader. However, be prepared – all novices in FX trading make the same common mistake in the very beginning. Whether they are too optimistic and believe the can become millionaires in a few days or they tend to be quite pessimistic, thinking that only super-smart people can work as FX traders. As usual, the truth is somewhere in the middle.
First and foremost, everyone, literally everyone can become a trader and have a prosperous career. The second point, you need to learn many things. You can’t skip the process of education since there is no magic method that will make the profits while you are doing nothing. Just like with any business job, new FX traders have to work a lot to achieve the goal of almost passive and stable income. Luckily, there are automatic expert advisors and professional brokers who can help to avoid the major bumps on your long road to a prosperous FX trading career.
With the help of EAs and brokers, after multiple tests and trials, you may pick a method that works for you.
Important advice to all novices: there are working and free (!) trading strategies. Do not trust the scammers who claim to have the one and only working strategy that you have to buy. Trustworthy brokers will never sell you a win-win strategy because they understand there is no such thing. On the contrary, they will offer you calculate all risks, test every new method of trading, recommend the solid indicators for analysis and effective trading platforms. For instance, the broker may offer a plan for improving your trading conditions. Stick to such companies, they understand how FX trading works.
What is a Forex trading strategy?
Every prosperous trader has a strategy he or she follows. Do not believe the people who say that they trade purely “on their gut feeling”. No, that is not how it works. Even the simplest strategy is built on the FX basics – support and resistance levels, i.e. whether you buy or sell a currency pair.
Some strategies are based on fundamental analysis (news, economic events) or technical analysis (the monitor of indicators and charts on trading platforms). Many experienced traders have a few strategies based on the combo of technical or fundamental factors. Some traders go even further and try to develop their strategies. However, novices should stick to the working and free methods that were already tested by thousands of traders before them.
1. Price action method: playing the support/resistance areas
You pick whether to buy or sell currency pairs, become a bull or bear. However, there are the FX traders who manage to trade on the analysis of the bulls and bears’ behavior. It is price action trade. Sometimes traders call it the naked trading because it happens without the use of any indicators.
When you choose this method, you have to analyze the market’s behavior of bears and bulls. If your analysis shows that bulls control the market, you buy (long orders). If the bears control the market, you sell (short).
- If you need to learn to trade without the use of indicators and “feel” the market, price action trading is the best way to do this;
- A good method for traders who appreciate their time;
- It is simpler than most strategies;
- Professional guidance is obligatory;
- The proper knowledge is required to be prosperous;
- It’s considered the advanced form of trading among beginners;
2. Position trade: for those who can wait
If you intend to stick to long-term trading, then this method will be good for you. Position traders usually trade on the daily or even weekly timeframes. Followers of this method usually rely on NFP, retail sales, GDP and fundamental analysis in general. Technical analysis is applied only when you enter the market.
- Not time-consuming;
- Less stress;
- The chances to get the profit is 1 to 5;
- You ought to use the fundamental analysis – follow the news and events;
- Stop loss is wide so you need a huge fund;
- Low quantity of trades so the profit is relatively smaller;
3. Swing trade: the art of holding trades
This medium-term method allows traders to hold the orders for weeks and days. People trade on 1-hour or 4-hour timeframes. Swing traders need to capture “a single movement” that is called a swing. Swing traders have to learn the technical concept of resistance and support, moving average and candlestick patterns.
- It is possible to have a full-time job and trade at the same time;
- You can make the profits annually;
- The big trends will pass by;
- Overnight risks are possible;