Best Forex Trading Strategies For Beginners

We often wonder how some forex traders become successful and make significant profits while many beginners struggle to find a footing. Well, the answer can be found if we compare the trading plans they follow and also the trading styles they choose. Because they shape your trading approach and strategy for navigating the currency market comfortably. If you follow a poorly defined strategy, you are not going to make any progress no matter how hard you try. Just having a solid strategy does not promise success but it does increase the likelihood of success. Rest depends on your knowledge and skill level.

There are a lot of different strategies that have a good success rate but you have to choose the one that can give you the results you desire and this blog will help you in making a choice.

Starting With MT4

We have to start with MT4 before moving on to strategies because you cannot execute any strategy without a fully functional trading platform. The classic MT4 is a popular choice among newbies as its intuitive features make trading easier. You might struggle to understand the technical side of currency trading during the initial phase but the simplicity of MT4 can relieve your stress. MT4 can be used to trade more assets but the focus is always on forex trading from the time of its launch. You will get the login credentials to activate your MT4 account once you sign up with an MT4 broker.

The smooth trading experience is another reason to choose MT4 as you get multiple order types, timeframes, technical indicators and more. It is not as advanced as its successor MT5 but still has all the essential tools one needs for devising manual and automated trading strategies. You can also use MT4 for backtesting and optimising your strategy for better results. 

For those who are struggling to filter the options for finalising their first ever forex strategy, here are 5 options that can bring the best out of you as a beginner.

1. Copy Trading

Traders are often discouraged from blindly following someone else but copy trading is different. You are selecting a trader to copy based on their performance and your own trading goals. You can minimise the risk through diversification and reputed copy trading platforms offer additional features to protect you from the risks. Thus, it is a safe option for those who are not ready to trade themselves or unable to develop a strategy from scratch. You can even try copy trading as a side hustle while you learn to trade yourself.

You just need to find a reliable copy trading platform and find top traders that you can copy. The copy trading process is very easy and the trade positions opened by the main traders get copied to the account of followers in real time. You will not be entering or exiting trades manually but will get to make profits by investing in the profitable trading systems that have performed well in the past. But you need to manage the risk as the future can be different and the results can vary.

2. Swing Trading

Swing trading strikes the perfect balance when it comes to time frame and duration of trades. It is not very fast-paced but it is also not boringly slow. It is a medium-term strategy and you just have to wait for the currency pair price to take a swing. The trades can be closed within a few days or weeks depending on how long you want to keep them running. But one thing that you need to consider while choosing swing trading as your strategy is the swap rate or rollover which is applied to all overnight trade positions.

Muslim traders need to avoid swap for religious reasons. Because swap is based on the interest rate differential of currencies and interest or riba is Haram for Muslims as it is considered to be financial exploitation. Thus, Muslims who want to keep the trades open for an extended duration should open a swap-free account with a broker providing Halal conditions for currency trading. It allows you to keep the trades for however long you want without worrying about riba being charged. 

3. Position Trading

Part-time traders always complain about not getting any time to monitor the market. But you won’t have to watch charts all day long when you are keeping a trade position open for a longer duration. In position trading, you depend on longer timeframes for analysis and profits are made by joining the trends that last for a long time. The duration of trades can be several weeks, months or even years and the longer you hold it, the higher profit you can make. You should consider the swap in this strategy too as the trades will be kept open overnight.

Another thing to consider in position trading is that you will have to perform both technical and fundamental analysis for planning your trades. Because the long-term trends and price fluctuations will also be influenced by the economic factors that affect the exchange rate of currencies. So, technical analysis has to be combined with fundamental analysis to figure out the long-term trends. The challenging part of position trading is staying calm while witnessing short-term volatility, hence patience is a prerequisite for position traders. 

4. Day Trading

If you believe in calling it a day after holding a trade for a few hours, then day trading is the best strategy for you. As a day trader, you enter and exit all trades on the very same day and those who want to earn profits on a daily basis will prefer this style. The timeframes are shorter and you can make informed decisions by performing technical analysis. But you should also keep an eye on the news and you can feel at ease as there is no overnight risk or swap fees to be considered.

Short-term trading strategies are harder in the sense that they require high precision. You can use various trading tools to calculate trade-related metrics quickly by entering the required data. They will make calculations easier by giving accurate results right away. Day trading should be done with major currency pairs at first as they are very liquid and have tighter spreads. You can also trade with minor pairs that are suitable but exotic pairs should be avoided to minimise the risk.

5. Scalping

The last strategy in this list is forex scalping. Even though many beginners prefer to do scalping to make quick profits by entering and exiting multiple trades within a few minutes, scalping is suitable for those who are highly skilled. In this strategy, your timeframe will be 1 to 5 minutes only and thus it is an intense strategy where you will have to think and act really quickly before you lose a trading opportunity.

Scalpers make profits from minor price fluctuations by catching a few pips from a trade. You will have to execute multiple trades to reach your daily profit target and becoming a successful scalper requires a lot of focus and technical analysis skills.

Conclusion

With that, you have learned the basics of all 5 beginner-friendly forex strategies that you can follow for trading success. You should consider the pros and cons of all these strategies for selecting the one that suits your trading personality. Always try it on a demo account first before going live.