Forex Trading: Four Basic Trading Strategies for Beginner Traders

Have you thought about beginning to trade on the foreign exchange market? If so Forex is the best plate form for you. We inform you that it’s definitely a smart option to trade on the market for foreign exchange. Comparing Forex trading: Four basic trading Strategies for Beginners in Traders with the market for stocks, trade on the forex market is performed throughout the week at various times. This is due to the fact that the forex market is open and closes according to the time zones of different nations.

So, if you’ve taken the decision to start trading on the market for forex it is certain that you will reap an advantage in the long term. However, for a beginner, it might seem too overwhelming to make trades in the market for forex. It may seem like it’s difficult to grasp the market.

It is possible to think you need to be glued to the charts of trade to make the most efficient trades. However, this isn’t the situation! There are several beginner strategies you can employ to be successful in trading on trading on the foreign exchange market. This gives you time to study and increase your skills and knowledge and ultimately become seasoned trading forex.

However, before we reveal the four fundamental strategies for trading for beginners, let’s take a glance at some fundamental concepts and two key factors you must take into consideration prior to starting making a decision to trade forex.

Important Factors to Consider Forex Trading

If you ask any experienced forex traders what advice would they offer to new traders? They are likely to mention the following two points.

Percentage of investment:

Many forex trader experts recommend that to reduce the risks of investing in general it is best to not invest more than 5percent of your total capital per transaction. This will ensure that you don’t lose a lot of money because of fluctuations.

Leverage

Another aspect that experts suggest novice traders take into consideration is leverage. It is said that any new trader should not exceed 1:10 leverage. This will also ensure that they don’t suffer massive losses as a result of fluctuation. Also, it allows beginners to make margin calls so that they are able to decide whether to pull their money out or just wait for an eventual reversal.

These two aspects were considered by traders everywhere from the very beginning of trading in forex. But, sometimes, traders who planned to take on more risk omitted these elements and ended up costing them lots of money.

In particular, since especially, after the Great Recession in 2007-08, the majority of traders have begun to take into consideration these two aspects. If you’re a beginner or an expert, taking note of these two aspects prior to forex trading will always be beneficial.

Basic Forex Trading Strategies

We’ll now move on to the main topic of this blog post, and it is the four fundamental trade strategies for forex that all beginners should be aware of.

Moving Averages

If you are a novice trader, you’ll desire to make money. As such, making profits is certainly a positive thing for the trader in your life making use of strategies like the Simple Moving Averages (SMA) strategy could be helpful. Ovik Mkttchyan

As the title suggests it is necessary to find the average closing price for the currency pair over a period of time. This will provide you with an idea of the trend that is followed by the pair of currencies. Ovik Mkttchyan

In the beginning, you’ll be able to estimate how much SMA over 20 consecutive days. All you have to do is take note of the closing prices of the chosen currency pair over the course of 20 days. Add these values, then divide the sum by 20. This gives you a sign of the strong trending over the next 20 days.

Expert traders use longer days, like 200 days for calculating SMA. However, as a novice, you should begin small and gradually increase your investment.

Carry Trade

This is one of the most well-known beginner trading strategies for forex which can be employed to learn about the market and earn the first profit without sacrificing too many fundamentals.

This strategy is based on utilizing the fundamental idea of purchasing a high-yielding currency with a lower-yielding currency. The broker will then pay the differential interest to the customer until the position is opened. To better understand this strategy, here’s an illustration.

For instance, you can are able to have two currencies, for example, USD/RUB and USD/JPY.

For USD/JPY, the is in the range of Federal Funds is 0.25% while with the Japanese Bank it is -0.1 percent. The differential rate is at 0.35 percent.

For USD/RUB, the rate is in the range of Federal Funds is 0.25% while with the Russian bank, it is at 6 percent. That means their differential rate is about 5.75 percent. That means that a novice trader such as you could make up to $15.75 each day or $5,750 for the year.

The only thing to keep in mind is to not invest in emerging, new currency pairs due to the increased risk because of the high volatility.

Purchasing Power Parity

Another simple forex trading strategy one of the most popular is Purchasing Power Parity (PPP) in which you evaluate the current exchange rates against the PPP. This helps you identify the currency that is either overvalued or undervalued.

The currency that is moving 20% higher than that PPP level is undervalued while one that is 20% lower than the PPP is less valuable.

The PPP is not a requirement to be utilized by the market for forex. However, the most popular currency pair will be 20% or less than the PPP. Additionally, PPP is an excellent method to follow if plan to trade in the long run. It is then possible to examine the length of PPP against the exchange rate currently in place to see a clearer picture.

Interest Rates

Every forex guide will show that a high-yielding currency is more attractive contrasted to lower-yielding currencies. Also, trading in rates of interest for currencies can be beneficial for those who are just beginning to trade.

All you have to do is research and study the Consumer Price Index of the central bank of the country to figure out the annual inflation rate they’re striving at. However, you should be aware that any major change in the country could affect the CPI.

It can also impact the performance of the currency. It may either increase or decrease its appreciation. Additionally, other economic variables like the growth of the Gross Domestic Product rate can influence the CPI.

USD to JPY

The currency is the official currency of Japan. The Japanese yen gained importance throughout the Meiji restoration effort that was designed to make the Japanese economy more modern and westernized. The currency has experienced steady growth after its decline in World War II and the 1973 oil crisis.

Because of the Japanese government’s stability intervention policy In the wake of its stability intervention policy, the Japanese Yen has a tendency to fluctuate daily on the market. However, the central bank of Japan assists in keeping the rate under control by buying and selling the currency on a massive scale.

If you use USD as your primary currency You can earn huge profits trading in a currency called the Japanese Yen. However, this is only possible when you make trades at the correct moment.

USD to EUR

It is the most frequently trad exchange rate in the Forex market. It is the Euro represents the primary currency of all members of the European Union. Of the 28 countries that are members belonging to the European Union. 19 of them employ Euro to be their main currency for transactions.

Both of these currencies are heavily affected by political developments that are taking place in the US as well as the European Union. For instance, if, for example, you believe that the European Central Bank interferes in markets to boost the Euro it will result in an exchange rate of euro to dollar decrease.

USD to CAD

Canada is the fiscal neighbor that is a fiscal ally of the US. Any slight shift in the economy of one of the countries will impact this currency pair.

Most importantly, the worth that the Canadian dollar is highly dependent on the price of oil. any slight variation in oil prices can affect how much value is placed on the Canadian dollar.

If you’re selecting to use this pair of currencies, be sure to keep a watch on the price of oil. This will help you earn profits.

USD to CHF

The currency used by Switzerland designate as Swiss Francs (CHF) which is considered the most secure of the currencies.

This is due to the fact that CHF is able to appreciate even when other currencies are depreciating. Particularly during the midst of political instability. CHF has proved to be the currency that is stable in moments of uncertainty.

Therefore, if you’re planning to start trading on the market for forex, you may prefer CHF.

GBP to USD

The currency used by the United Kingdom is the British Pound Sterling (GBP) which is it is third in terms of trading worldwide. The country did not switch to Euro even though it was a member of the European Union until 2016.

However, the GBP impact over the past decade is because of two significant incidents. It was the subject of major cash-outs from investors in both the Great Recession of 2007 and the 2008 financial crisis.

The currency experienced a massive cash-out by investors in 2016. Following the country’s decision to vote in for Brexit. Investors continued to cash out the currency in order to invest in more stable currencies in the next few months following the Brexit vote.

AUD to USD

A sixth-highest traded currency around the globe The sixth most traded currency in the world, the Australian Dollar is highly dependent on the Canadian Dollar. This is due to the interdependent relationship between countries in the production of products like coal and iron.

If you’re thinking of trading in Australian dollars it is essential to keep an eye on these commodities. This is the only way to anticipate making profits.

Conclusion

In conclusion, if you’re just starting to trade on the market for forex. You should think about the amount of leverage and investment. This will help ensure that you do not suffer losses.

You can also pick among four strategies for trading forex to effectively trade at the beginning. You can also learn more and trade more efficiently.

If you’re looking to learn more about these fundamental and advanced strategies for trading forex, make sure you visit Forex Traders Handbook. It is an online platform that lets you learn all you need about the market for forex and trading.

No matter if you’re a beginner or a professional or a pro. You can use this website to learn how to use forex. Receive Market analysis and reports on forex brokers as well as forex robotics. Forex Traders guide is the best place to get all the information you need regarding forex trading.

So, don’t hesitate! Begin trading today with Forex Traders Guide now!

It is also possible to visit the Forex Traders guide to get more information about the market for forex and currency pairs. The website aims at providing a simple and easy information source for anyone looking to invest in the market for forex. There are many details about the forex market. Beginning with the basics to advanced levels of information like forex brokers and trading strategies, forex robots, and many more.

If you’re planning to get started trading on the forex market but require assistance or information on the latest developments, be sure to go to Forex Guide to Traders now.