Forex trading has proven to be a lucrative business for numerous people worldwide. For this reason, more and more people are venturing into the trade, looking to rack up profits. However, not most individuals make it that far. Most forex trading strategies are quite complex and present a steep learning curve.
Therefore, most people give up because they can’t seem to learn the trade’s concepts and tricks. If you’re on the brink of throwing in the towel, do not. Here are some simple yet effective trading strategies for beginners that will set you up for success. Let’s dive right in.
Bull Flag Pattern
One of the most straightforward trading strategies to learn is the Bull Flag Pattern. This is a high probability setup that forms a pattern that looks like a flag on the chart. Some of the characteristics you should watch out for when looking to take advantage of this strategy include:
- A strong move higher on a particular stock, which has a new catalyst
- Following the strong move higher, there should be a consolidation pattern.
- The consolidation pattern is followed by a breakout higher.
- High relative volume
The first thing you need to do is to identify a stock that’s streaming on high relative volume to utilize this strategy. It’s best to pick one that’s already on the longer-term trend. Next, wait for the stock to consolidate. The goal is to ensure the consolidation is of much lower volume compared to the upward move.
But when the stock breaks above the consolidation pattern with a higher volume and exits below the bottom of the consolidation pattern.
The carry trade strategy is quite common among professionals as well. What makes it perfect for beginners is the fact that it’s quite simple to learn. The essence of this strategy is to make a profit from the difference in yield between two currencies. To make it easier to understand, let’s take a trader scenario who physically converts currency.
Imagine the trader takes a loan in Japanese Yen, which has an extremely low-interest benchmark. Therefore, the cost of their debt is exceptionally negligible. To make a profit and handle their debt without any loss, they convert the sum into Canadian dollars and invest the money into a government bond that offers a 0.6% interest. The interest they receive from the bond should be enough to finance the loan, and they still get to keep a lot of money.
However, this strategy only works if you pick the right currencies. If the conversion leads to lower profits, you may end up paying more than you should have without changing currencies. Therefore, research and ensure you’re making the right move.
Learning Never Gets Old
As a beginner, your best asset is knowledge. Sure, you want to learn all the secrets and start earning big in a short time. We get it. However, this won’t happen if you don’t understand the concept of forex trading. You may be using the best platforms such as EarnForex and still lose a lot of money.
Therefore, even as you learn other trade tricks, learn the essential knowledge strategy — knowledge is power. Keep up with the new trends and learn as much as you can. Learning doesn’t stop when you’ve mastered a few tricks here and there. You must keep doing it even when you’re a pro trader.
Set Aside Enough Funds
Most beginners get into trading without deciding how much they’re willing to spend on the trade. You can’t afford to trade blindly. Any small mistake and you’ll lose all your money. It’s always best to understand your risk and stay within them.
Most successful traders risk less than 1 to 2% of their account for each trade. Therefore, set aside enough funds you’re willing to trade and assess your risk appetite. Remember, the higher you risk, the more money you’re likely to make or lose.
Steer Clear of Penny Stock
Penny stocks seem like the best deals because they’re low priced, but you should avoid them. In most cases, these stocks are illiquid, which makes it challenging to hit the jackpot. Besides, most stocks under $5 are often delisted from significant stocks. The only way to trade with them is over the counter.
Therefore, avoid penny stocks at all costs unless you’ve done your research and you see a real potential to make profits.
When you’re just starting, forex trading seems exceptionally challenging. But you shouldn’t give up. The secret to succeeding as a beginner is keeping it simple, evaluating your risks, and learning. It may not happen overnight, but if you keep up with it, you’ll learn everything you need to become a successful forex trader. So, start with these strategies and start making profits.