Five FX trading strategies for UK newbies
The foreign exchange market, or forex, is one of the most exciting markets in the world. It’s also one of the most challenging, and to succeed in forex trading, you need to understand how the market works and what factors can influence currency prices. If you’re new to forex trading, here are five essential forex trading strategies.
The Bladerunner strategy
The Bladerunner is an incredibly versatile forex trading strategy that traders can use in various market conditions. It’s based on a simple concept: currency prices tend to move in cycles. By identifying these cycles and trading in line with them, you can profit from both rising and falling markets.
To trade the Bladerunner, you need to identify a market trend and then wait for a pullback against that trend. Once the pullback starts, enter a long position if you expect the market to continue moving in the same direction. Alternatively, enter a short position if you think the market will reverse.
The Fibonacci retracement strategy
The Fibonacci retracement strategy is based on the idea that currency prices often retrace a portion of their previous moves. For example, after an uptrend, it’s not uncommon for prices to pull back by 23.6%, 38.2%, or even 50.0%.
To trade using the Fibonacci strategy, you first need to identify a market trend. Once you’ve done that, draw horizontal lines at the Fibonacci retracement levels of 23.6%, 38.2%, and 50.0%. These horizontal lines are the potential support and resistance levels.
If the market is an uptrend, look for pullbacks to the 23.6%, 38.2%, or 50.0% Fibonacci retracement levels. These levels could provide an opportunity to enter a long position. Alternatively, if the market is in a downtrend, look for a bounce off the 23.6%, 38.2%, or 50.0% Fibonacci levels – this could be an excellent time to enter a short position.
The moving average crossover strategy
The moving average crossover strategy is another popular forex trading strategy. It’s based on the idea that when two moving averages – one slow and one fast – cross over, it signals a change in market momentum.
There are two ways to trade using this strategy. The first is to buy when the fast moving average crosses above the slow moving average. The second is to sell when the fast moving average crosses below the slow moving average.
Which moving averages you use will depend on your trading style and timeframe. For example, if you’re a day trader, you might use a 20-period moving average and a 50-period moving average. Or, if you’re a swing trader, you could use a 200-period moving average and a 400-period moving average.
The MACD crossover strategy
MACD stands for moving average convergence divergence, andthe MACD crossover strategy is similar to the moving average crossover strategy, but it uses different indicators.
Like the moving averages, the MACD comprises two lines – a short line and a slow line. These lines crossover when market momentum changes direction.
Traders can use the MACD crossover strategy in two ways. The first is to buy when the MACD line crosses above the signal line. The second is to sell when the MACD line crosses below the signal line.
The price action trading strategy
The price action trading strategy is slightly different from the other strategies on this list. That’s because it’s not based on indicators or moving averages. Instead, it’s based on studying past price movements to identify patterns that could repeat in the future.
Price action trading is a bit of a misnomer – it’s not about just looking at the price. Instead, it’s about studying how the price moves and making trading decisions based on that.
The bottom line
If you’re serious about trading, these five tips are excellent to start. The important thing is to find an approach that suits your circumstances and personality. With time and practice, you can develop into a successful FX trader. Newbies are advised to use a reputable online broker such as Saxo Bank. For an explanation of how to execute trading strategies on their platform, you can visit their site.