With the countless forex trading strategies out there, picking the right one for you can be an overwhelming experience – particularly if you happen to be new to forex trading.
In this article, we will highlight a number of simple strategies that can be successfully utilized even by those with minimal experience.
Each of these strategies are trend-following strategies, which are designed to align your trades with the predominant trend in the instrument you are trading. While there’s no such thing as a fail-proof strategy when forex trading, these approaches are a great way to start adding logic to your trading decision-making.
The Price Breakout Forex Strategy
The price breakout forex strategy is a simple way of identifying the beginning of a new trend when the price of a financial instrument is breaking out of a consolidative range. A price breakout usually involves a higher high or a lower low, which is outside the instrument’s current trading range.
There are two types of price breakouts to look out for when trading forex. One is a breakout from a horizontal trading range, while the other is a breakout from a wedge trading range.
The horizontal price breakout strategy is straightforward one to get your head around, given that all it requires is a break above an established resistance level or below a crucial support level.
The wedge price breakout pattern is more reliable as it involves the price of an instrument narrowing down to a wedge. The best way to identify a wedge forming is by drawing trend lines. To make this strategy even better, you should wait for the price to retest the level it just broke out of as a support or resistance level before initiating your trades.
The Pin Bar Strategy
The pin bar trading strategy is one of the most popular trading strategies among new traders as it is very simple to use.
According to this strategy, when the price of an instrument breaks above a resistance level or below a support level, and forms a pin bar or two shortly thereafter, this indicates the beginning of a new trend.
For new traders, pin bars look like this:
In order to be successful while trading the pin bar strategy, it is extremely important to look at the prevailing long-term trend in a given instrument. For example, a bearish pin bar formed in a currency pair that is in a long-term uptrend should be ignored given the existing uptrend, as it could be indicating just a minor retracement.
The pin bar strategy should always be used in conjunction with the support and resistance levels in order to validate the pin bars traded.
Moving Average Trading Strategy
Another simple forex trading strategy is the moving average crossover trading strategy, which is useful in identifying long-term trends. This strategy identifies suitable trade setups when two simple moving averages (SMAs) cross over each other. The strategy basically involves overlaying two SMAs on a price chart and identifying points at which the two SMAs intersect.
The strategy typically involves plotting two SMAs, one covering a shorter time frame than its counterpart. According to this strategy, when the shorter-term SMA crosses above the longer-term SMA, this generates a buy signal. On the other hand, a sell signal is generated when the shorter-term SMA crosses below the longer-term SMA. The strategy can also be used with other types of moving averages such as the exponential moving average (EMA).
While useful to all traders, the price breakout forex strategy, pin bar strategy, and moving average trading strategy can be particularly helpful to new traders given their simplicity.
Do bear in mind, however, that trading is inherently risky and no single strategy is foolproof. It’s also a good idea to test all your strategies in a free Demo account from Exness and to familiarize yourself with them before you invest real funds.