Forex Trading Strategies for Beginners: Step by Step
When it comes to Forex trading strategies, you have probably heard this term before. Indeed, the foreign currency exchange market is a hard place to be for newbies. While pitting one national currency against another might seem relatively straightforward, there is much more to it than that. There is a lot of analysis, planning, knowledge, and timing that goes into executing profitable FX trades.
FX trading is not something you can just do on a whim. It’s not like learning to ride a bike and it cannot be done in just a couple of hours. Perhaps the most important thing that you need to master to be successful in this world are Forex trading strategies.
Now, of course there are some really difficult trading methodologies out there, ones that are only ideal for advanced and seasoned traders. As a beginner, these are strategies you want to stay away from. Therefore, today we want to talk about Forex trading strategies for beginners. We aren’t going to focus as much on particular Forex trading strategies as on what these strategies are, what they entail, and you need to put a solid trading plan together.
The Basics of Forex Trading Strategies
In terms of Forex trading strategies, before you can learn or master any of the many out there, you need to be aware of the basic components of strategies. Let’s take a look at the 7 main components which you need to have in your arsenal in order to put a variety of Forex trading strategies to use.
One of the major components here is that of time management. You need to be aware that if you plan on making real money in the world of FX, you need to allocate a decent amount of time each day. Folks, you won’t be able to make big profits if you trade only for an hour or less each day.
If you want to make profits, you constantly need to be on the lookout for profitable opportunities, whether it be during the morning, noon, or later on in the evening. Simply put, Forex trading strategies take time to execute properly.
Another big component that you need to factor into your trading strategies is how much money you have and how much you can risk. Some strategies require big investments just to open a single position, whereas other strategies allow for minima cash investments.
You need to figure out how much money you can afford to lose. It’s all about managing your risk so you don’t end up wiping out your trading account. Never risk more money than you can afford to lose, because if you do lose, and you have not engaged in risk management, you will end up in some seriously hot water.
A Basic Education of Forex Trading Strategies
The next component that you need to factor into any Forex trading strategy is your own knowledge and skills. Unfortunately, trading currency pairs does require a good deal of knowledge, skill, and practice. As we mentioned before, this is not something that you can just decide to do one day. In fact, getting a decent education may perhaps be the most important part of any Forex trading strategy.
Simply put, you need to understand market basics, what indicators are, how to use charts, and all of that other fancy stuff. If you don’t have an understanding of the fundamentals, executing various Forex trading strategies, even the ones that appear to be simple, won’t be easy.
Something else that is important to keep in mind here is that you need be patient and bide your time. Sure, a seasoned trader may be able to analyze the market correctly the very minute it opens up, but as a beginner, this is not very likely for you.
Remember that the FX market is open for the majority of the week, so you should not rush head first into a random trade that you are unsure of. Simply put, take your time, put in the hard work, and only execute trades when you are fairly confident in your chances of success.
Starting Small with Your Forex Trading Strategies
The next thing to keep in mind when it comes to mastering FX trading strategies is that the newer you are to this, the harder any strategy is going to be to execute. Therefore. It is crucial that you start out small.
There is no need to trade massive lot sizes, nor is it ideal, particularly when you don’t have much experience under your belt yet. Also, in terms of trading volume, it’s better to go with quality rather than quantity. Plan out 2 or 3 trades for the day, make sure to stick to your plan, and leave it at that.
What you also need to remember here is that Forex trading is about the strategies, the technical aspects, timing, and so much more, but not about greed, emotions, and gut feelings. Once you do begin to master various Forex trading strategies, you need to be consistent and stick to them.
Don’t veer off course, don’t get greedy, and don’t execute trades just because they look good or you have a gut feeling. If you have a solid plan, stick with it, and if it’s not working, re-evaluate your plan and start from scratch.
Trying Demo Accounts
The other thing that we would suggest to help master a variety of Forex trading strategies is to open up a demo account where you can test your strategies without having to risk real money. Once you see some success trading on demo accounts, only then should you move on to trading with real money.
Forex Trading Strategies for Beginners – Summary
Remember folks, when it comes to FX trading strategies, as a beginner, there are various important components which you need to keep in mind. In terms of the basics, remember that it’s all about timing, consistency, risk and time management, and trying it out by starting small.
Also, remember that the 3 main components of Forex trading strategies are volatility, volume, and liquidity. Once you get these concepts down, finding the right FX trading methodologies to suit your needs becomes much easier.