The Best Forex Strategies For Beginners

Forex can be an overwhelming market to start trading in. Due to its size and depth, the diversity of strategies prevalent in the forex markets and communities can be staggering. Often times the strategies have excessively complex names that induce a headache by just reading them and other times they are so complex and convoluted that no one seems to really get how to implement them except for a select few.

These strategies are generally not covered in forex trading 101 guides. Those are more general to explain the concepts, but when it comes to the actual execution of a strategy, those tend to be lacking. Terms like Fisher’s strategy, forex puria method and moving average forex strategy just sound like a bunch of random investment related terms strung together to most beginners.

Of course, over time, those terms will make more sense and the beginner trader stops being a beginner and gets more deeply involved in theory and market practice.

The common question that arises is – what strategy should a beginner be using?

As with all other types of trading, there is no clear answer that will suit everyone that faces this dilemma. There are too many variables – personal preferences, trading style, trading length, capital size and so forth.

Instead, we can break down how strategies are formulated and hope that traders can use those building blocks to create a strategy to suit them.

Strategies can be classified in a number of ways. One of the common approaches to this is based on trading time:

• 1) Short Term

A short-term strategy is normally one that revolves around placing positions and closing them within the span of one day. Sometimes these strategies involve holding a pair for a few hours, sometimes strategies work for the duration for a minute or less.

• 2) Medium Term

Medium-term strategies work by holding active positions for a couple days up to a few weeks. These tend to be the most flexible strategies but also involve a decent amount of research and work.

• 3) Long Term

Long-term strategies are positions held for at least a week up to several months. These are the lowest in terms of time investment, requiring the investor to only keep a passive eye on the market and its movements.

The other way to categorize them is by level of risk:

• 1) Conservative

Conservative strategies involve taking minimal risks. It’s the epitome of playing it safe.

• 2) Moderate

Moderate strategies are medium-level risk – nothing crazy, but not entirely safe either.

• 3) Aggressive

Aggressive strategies purposefully take on high levels of risk in order to pursue the greatest rewards. In forex trading this often involves trading an exotic currency pair and keeping an eye on geopolitical events which can impact currency price. Definitely not recommended for the faint of heart.

There are several more ways to classify strategies, but these are the ones that are broadest and make the most sense to beginners. For new traders, the recommendation is to not go crazy but to start slow and simple. The more information a new trader has to consider before placing a trade, the likelier they are to get overwhelmed and make mistakes.

A medium or long-term trading strategy with conservative to moderate levels of risk makes the most sense for new traders. These allow them to not have to sit on a minute-based chart and frantically scurry around their computer in search for a few pips that could make them a few dollars profit.

Simple strategies are the easiest to follow and implement and also allow for auto-trading, that is the use of computers to make trades for you automatically. Two months of trading with a medium term, moderate risk strategy seems like a good amount of time to get settled in before looking at something more complex.