Forex trading strategy for beginners 2021

Last updated: 25.11.2021
Howard Friend
Author:
Howard Friend
Adviser
CFD & Trading
Experience
> 10 years

We at Nextmarkets know how popular forex trading is. We want you to be confident when starting your trading journey, so we’ll look closely at the market and make sure you are receiving the best forex trading strategies for beginners.

We are a team ranging from trading enthusiasts to researchers who all have experiences with forex. We will use our expertise to provide you with a fundamental analysis of the forex market and with advanced forex trading strategies and give you valuable points to consider before you begin.

Here are ways you can develop your knowledge of forex and start to develop your own forex trading strategies.

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  • Forex Market and Trading Platforms
  • Choosing the Right Broker
  • Types of Forex Trading Strategies
  • Knowing the Risks
  • Best strategy is to keep practicing
  • FAQs

Understanding Forex

Before you get started trading forex, we wanted to break down what forex is to help build your understanding. The forex market or foreign exchange (FX) market focuses on trading different currencies at an agreed price. The market determines the exchange rates for each currency. It allows traders, banks or companies to convert one currency into another.

Forex trading is the largest market in the world in terms of trading volume. Large international banks are the main participants of the forex market, spread across the four major trading centres globally in London, New York, Tokyo and Sydney. Since there is no central location, you can trade 24 hours of the day, excluding weekends.

Currencies are always traded in pairs -you will see the phrase currency pair in a lot of places talking about forex trading strategies -like EUR/GBP or GBP/USD. The foreign exchange market does not set its exact value but will determine the relative value. It does this by setting the market price for one currency if paid with the other.

For example, 1 GBP is worth 1.39 USD in a GBP/USD pair, at the time of writing this. Traders with successful forex trading strategies have to actively speculate the direction the currencies will likely go in the future as they try to buy and sell the currency pairs.

Forex Market and Trading Platforms

Traditionally forex brokers would buy and sell currencies on behalf of their clients, and they would usually have their own, protected trading strategy, but now there is access to online trading platforms so anyone can trade. Some of these platforms even provide you with forex trading tips and trading tools to assist you in getting started and to help you eliminate any high risk of losing capital.

The platforms give you the freedom to trade on as little or as many currency pairs at a time. Online platforms also take advantage of the market’s current price movements and help build your forex skills and take advantage of trading opportunities when they present themselves. This makes it easier for trend traders to follow any trends and speculation in the market.

We looked at a few examples of different types of forex markets to consider and included them in our tips on forex trading to uncover the best forex trading strategy. These include spot, forward and futures forex markets.

Spot forex

Spot forex market is the physical exchange of a currency pair. It takes place ‘on the spot’ generally at the exact point the trade is settled.

Future forex

A future forex market is where a contract is agreed to buy and sell a certain amount of the currency at a set price at a future date. This contract is legally binding.

Forward forex

A forward forex market is similar to the future market as there is a contract agreed to buy or sell a certain amount of a currency. But with a specified price that will be settled at a later date.

Choosing the Right Broker

We at nextmarkets believe we provide a comprehensive and interactive trading platform allowing for trading strategies to be executed perfectly, in comparison to the many that are available. We tend to individual forex traders at different stages of trading by including forex trading tips and tricks for beginners and an easy to navigate website for those more advanced.

The right broker will help you enhance your forex strategy. We offer a curated coaching service with highly qualified experts who will provide a fundamental analysis of your trading activity and trading strategies and give you their insight and ideas to develop your trading skills.

Since our launch in 2018, the trading volume has significantly increased and there has been an annual average growth of trades achieved. We are a commission-free service and do not charge on withdrawal or order fees. Our platform offers the ability to develop a trading strategy and take part in trading CFDs, so you don’t take ownership of the asset but the position if you think the value will increase or decrease. We allow you to take advantage of the volatility of the forex prices in the market this way.

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Types of Forex Traders

There are several different forex trading styles and forex traders out there and understanding the market fundamentals and the type of forex strategy you want to employ is key. It’s a good idea to look through and find the style that works for you and that you are comfortable with. A major mistake that beginners make with their forex trading strategies is switching to a new trading style when they first encounter a problem perceiving a high risk of losing capital so they try to avoid the potential of losing money rapidly.

One of the most crucial forex strategies is being consistent with a trading style, even when things aren’t going your way. Many different trading strategies, such as day trading, require discipline and constantly changing your method could result in a losing streak and even more losses than you anticipated. Even when it seems challenging, stay loyal to the trading style you have chosen, and the rewards will be worth it moving forward.

We looked through a few forex strategies and trading methods which include:

Day trading

Traders will open and close a position on the same day. It removes the risk of large overnight movements in the market. At the end of the day, you will either have a profit or a loss. Day traders rely on small gains to build profits over time and identify currencies’ positions throughout the day. They focus on technical analysis and use tools like the Relative Strength Index to help with identifying trends and building the best day trading strategy.

Forex scalping

A short-term form of trading forex but is also known to be an intense way to trade. Scalp traders deploy an intraday trading strategy and will only hold positions open for seconds or minutes at most, then close them again. They aim to target small price movements within the day, at the busiest times of the day where there is more volatility in major currency pairs like GBP/USD. A forex scalping strategy is good if you want to make many quick trades and again focus on the small gains that day trading strategies like to take advantage of. The number of transactions that you execute in a day will increase the overall profits. But this method is known to be the most stressful.

Position trading

Position trading focuses on long-term price movements where the maximum potential of money is made from the fluctuations in currency prices. These long-term positions could last from weeks to months or even possibly years and have a focus on the broader market picture. Position trading relies on position traders not worrying too much about minor changes in the price. Instead, analyse the weekly and monthly price charts of the market and use technical analysis tools to help determine any future upward or downward trend that may arise and build a trend trading strategy around them.

Range Trading

Range traders rely on a lot of technical analysis and their trading opportunities arise in the form of identifying overbought and oversold currency pairs – you may have come across this as support and resistance levels – the main trading strategy here is to identify overbought currencies that do not have a steady and predictable range during their overbought periods, and to sell them during their oversold periods when the market moves. Many different aspects come into play with regards to range trading, stable and predictable economies, trending markets and of course the support and resistance levels of a currency pair.

Swing trading strategy

Swing traders usually hold positions for several days up to a few weeks. Like position traders, they don’t have to constantly monitor the price charts or minor fluctuations of the market movements throughout the day. It is the more popular and successful forex trading strategy because it can suit those who are just beginners or those who may have other commitments during the day. But we’d suggest, as one of our forex trading tips, you still dedicate a few hours of your day to analyse and evaluate the market.

Different types of forex traders use the Fibonacci trading strategy to help maximise profits. This trading style focuses on numerical trading to help limit the emotional bias and stress from trading. It is based on a ‘golden ratio’ that determines entry and exit points for trades at different time frames.

Knowing the Risks

The vast majority of exchanges that take place in the forex market are with the intention to make a profit, but you must always note that you can lose money when trading. The currency price movement of currencies that are converted every day are so frequent, their price movement in the market is extremely volatile. The volatility is what makes trading forex so lucrative to traders and potential beginners.

One of our recommended forex trading tips for beginners is knowing the risks of trading. There is a greater chance for higher profits but that also increases the risk of higher losses of your investment. It is always good to start off small and perfect your forex trading strategy, then work your way up to bigger investments when you are a more confident forex trader. Identify opportune trade entry points when the market moves and always perform risk management when it comes to your capital. Profit is not guaranteed so finding out what works and what doesn’t when you’re trading smaller amounts is one of our important forex trading tips for beginners.

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Best forex trading strategies - Keep Practicing

Forex trading can be challenging at first, especially if you are new to the world of trading and trading strategies. But take into consideration the points we have suggested and give forex trading a go.

Once you have familiarised yourself with potential trends in the market and found the online platform that is right for you, your forex trading strategy will improve, as will your confidence as a trader too.

We mentioned the number of risks that you could be met with, especially when trading currencies that are more popular because of how much they move around in the market. The highly volatile currencies will provide higher profits, but understanding how they move will lessen your risks in the long run.

Conclusion

We believe forex trading is a great form of investment for beginners. With our forex trading tips and tricks, you can start the journey of developing forex trading strategies that work for you and make the most of the forex market.

We differ from other online brokers because we aim to support our traders with functions and trading coaches to work with you on the platform. These will allow you to grow and develop your skills no matter if you are inexperienced or an advanced trader.

We provide a commission-free service without withdrawal or order fees and are determined to enhance your trading abilities and strategy on your journey, be it day trading, price action trading, swing trading or any trading strategy you choose to employ.

Remember, we don’t offer investment advice or anything that would constitute investment advice and you are always at risk of losing money. We give you the tools needed so that you can spot trading opportunities, currency price movements, investment trends and provide you with the skills to identify the technical indicators to build your own forex strategy yourself.

Forex trading strategy for beginners FAQs

✨Is forex good for beginners?

Forex has the highest trading volume of currency pairs in comparison to other trading markets. The currencies are extremely volatile in the market so it increases the amount of profit that you could potentially make when trading. Individuals who want to trade forex and currency pairs for the first time often think it is a quick profit, but developing your forex trading strategy and understanding the market will benefit you in the long run.

❕How do I trade forex successfully?

We want our customers to feel secure that their investment will grow. But we also know that trading forex does take time. We want to develop your forex techniques like using the Fibonacci trading strategy or whatever style you’re comfortable with, to stick with and see positive results rather than losing money rapidly due to inexperienced or panicked moves

❓How do I get better at forex trading?

There are several online platforms that allow you to implement a forex scalping strategy. But we at Nextmarkets believe our curated coaching support and online functions will provide you with the technical and fundamental analysis and extra support needed to develop that understanding of the forex market. We encourage consistency in your forex trading strategy, whether you choose to use forex scalping or swing trading, make the most out of our website.

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