In the financial world, the forex market shines like a beacon in the eyes of investors. After all, few markets are as volatile or highly leveraged as forex, while the derivative nature of currency makes it possible to profit even as values depreciate.
However, the presence of infrared leverage can also cause you to cause more than your initial deposit, so you’ll need to focus on understanding the market and its mechanisms in detail before investing your hard-earned money.
You’ll also need to develop a viable trading strategy and one that can optimize your profits over time. Here are some examples to keep in mind.
Why are Trading Strategies so Important?
While learning about the forex market’s fundamentals is crucial, this means little unless you can translate this into practical lessons and knowledge.
This is where strategies can come into play, as they enable you to weaponize knowledge and channel this into actionable plans that optimize profits over time.
Ultimately, the key is to utilize demo accounts, which can usually be accessed for a period of between three and six months. Available through licensed trading platforms like the MT4, demo accounts enable you to trade in a simulated, real-time market, without requiring you to commit your hard-earned cash.
This allows you to bridge the gap between theoretical knowledge and practical experience, by developing viable strategies and testing these against corporeal market conditions.
The Three Best Forex Trading Strategies
The question that remains, of course, is what are the best forex trading strategies in terms of accessibility and profitability? Here’s our top three:
The Pin Bar Trading Strategy
We’ll start with a trading strategy that’s ideal for beginners, thanks largely to the fact that it follows an overt and obvious pattern.
It’s certainly easy to identify points of support and resistance in the forex market, helping you to identify bearish and bullish trends in real-time.
Of course, one of the most basic principles of technical analysis is that former points of resistance evolve to offer new support, and the pin bar trading strategy enables you to identify future trends and price movements in relation to your chosen pairing.
The Inside Bar Trading Strategy
The inside bar trading strategy is another that suits beginners, as it requires you to use a pending order to trade a breakout in the direction of a major trend.
Unlike the pin bar alternative, however, this strategy is best traded as a continuous pattern. The inside bar here is typically smaller and within the high-to-low range of the prior bar, with the latter occasionally referred to as the “mother bar” by investors across the board.
Due to their composition, inside bars show a period of consolidation in the forex market, with daily charts forming a triable on a one-hour, 30-minute chart-time frame. They’re also particularly effective following a strong move in the market, as this allows traders time to plot their next move.
The Forex Breakout Strategy
We close with one of the most popular forex trading strategies, and one that’s widely used in countries across the globe.
This type of strategy requires you to identify a key point at which you expect a particular price to ‘break through’, before buying and selling at that price in order to profit accordingly.
Your action will depend on the nature of the breakout and the asset in question, while it’s fair to surmise that breakouts are best used when the market is near an extreme high or low of a particular movement.
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