The Forex trading arena is a well established market with many participants. It had steadily gained popularity as it has become increasingly clears that there is money to be made. This calls for strategies that will work in your favor so that you too can enjoy a piece of this Forex cake.
The sheer number of trading techniques can overwhelm a beginner and it is easy to shrug and let this investment platform go. There are strategies that are quite complicated and beginners are well advised to steer clear of these ones. The best move you can make as a newcomer would be to start with the simple techniques.
Just like with any new venture, it is always advisable to start with learning, observing and then beginning from the simplest so as to gain skills and develop the right attitude. A part of the learning process involves getting the right information, for instance, from here sec.rakuten.com.au.
A trend happens when a market leans towards a given direction consistently. A system that follows trends tries to turn out buy and sell signals that are in tandem with the formation of new trends. Many methods have been developed to identify when trends begin and end. A lot of the strategies that work have had similar methods developed.
Here are a few strategies you will find helpful as a beginner:
- Look for Price Breakouts
A breakout is when a market goes above its consolidation and either gains new highs or new lows. Markets consolidation is the movement of the price within a precise pattern of trading levels. It is, in simpler terms, that period when even the experts are undecided. It comes to an end when the prices go either above or below the prices within the trading pattern.
Breakouts are to be taken as signals that a new trend is nigh. However, not all breakouts signal new trends. When trading Forex, everything is about risk management. Thus, even a strategy as simple as observing a breakout must consider risk management. This way, should the trend break down, you will minimize your losses.
- The Simple Moving Average (SMA)
This is a lagging indicator which considers the older price data that moves more slowly than the present market price. The more preferred SMA is the longer one which moves slower than the shorter SMA. On the charts, the shorter one follows the current price very closely while the longer SMA unravels the price movement. When the shorter SMA crosses the longer on the charts, this is an indication that there is a change in the trend.
The shorter SMA moving above the longer one means that newer prices are longer than the older ones which means that an upward trend is beginning. The opposite means that a downward trend is in the offing.
When the Short SMA moves above below the longer one, that suggest a bearish trend and it is your signal to sell. When the movement is reversed, then it’s a bullish trend and you are advised to buy.
- The Carry Trade
This final strategy is quite popular with seasoned traders. However, do not take that to mean that it is complex. It is in fact easy to implement and comprehend. What this trend strives to do is to profit from the difference in yields between two currencies.
How does this work?
A trader borrows a sum in one currency whose interest rate may be rather low. The cost of holding such a debt can be casually waved off. The trader will then exchange their low-interest currency with a higher interest one and invests the profits received in, say, a government bond. The interest made on the bond should be above the cost of financing the low-interest currency debt.
There is, however, a disadvantage in that currency risks are incorporated in the trade. If the low-interest currency appreciates enough against the high-interest one the trader exchanged it for, the trader will lose money.
The secret to successful trading lies in getting information and being hands-on in the trading process.