Forex trading strategies - start trading at nextmarkets

Last updated: 23.01.2020
Howard Friend
Author:
Howard Friend
Adviser
CFD & Trading
Experience
> 10 years

If there was a single Forex trading strategy which worked every time, none of us would stick to the day job. Just because there is no completely foolproof way to win every time, doesn’t mean there aren’t Forex trading strategies which can help you make successful trades on the Forex market.

The key is to be consistent and to learn everything there is to know about your chosen strategy to become an expert at reading the markets and knowing and learn how to react to certain patterns of Forex signals. At nextmarkets, we provide a wealth of information that will allow traders to act on their strategies with confidence.

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What are Forex trading strategies?

A Forex Trading Strategy can be defined as a number of different things. It can refer to an overall trading methodology, such as day trading (see also the nextmarkets day trading definition). It could also refer to the systems and types of patterns that traders use to decide when to enter and exit trades.

Or, it could refer to a combination of both of these, which will then be used by any given Forex trader when deciding how to play the markets. Strategies can be determined based on news-based events which may affect the markets, technical analysis of historical market data or chart analysis of past and present market data.

No single strategy is a clear favourite for even the most experienced of traders, but consistency in your approach is key.

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Top Forex trading tips from nextmarkets

Once you have chosen a strategy which you think will work for you, get testing on the nextmarkets trading platform through a demo or real money account. To begin with, start with small amounts of money and very low levels of leverage. Do not assume that you will make huge amounts of profit, and only spend what you are comfortable putting at risk. Stick to just a single currency pair, to narrow down the variables as much as possible.

Prove that your strategy has legs, and then follow it carefully and consistently. Once you can see that it is working, start to slowly increase the size of your deals, but always stay within the realms of what you can afford to jeopardise.

If the strategy is not working, take a step back and reassess ASAP. There is nothing to be gained from pouring money into a strategy which is not working.

Forex strategies - Moving with the market

The majority of Forex trading strategies will involve moving in the same direction of the market. Ie. if the market price of a currency pair is increasing, the trader acts as if the price will continue to increase. Beginner traders are advised to always move in line with the market, as there is so much more to consider when opening and closing positions against the trend.

The market is a large, unwieldy force, which beginner traders are not going to be able to tackle single-handedly and come out on top. Counter-trending assumes that you know something which everyone else does not.

The chances of a novice trader spotting something that momentous before all other traders are practically zero, however, beginners should still practice their trades through their nextmarkets account until they become well-versed in spotting market changes.

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Creating Forex trading strategies UK that work with nextmarkets

To create Forex trading strategies that work, start with the most basic decisions. Firstly, pick which currency pair you wish to focus on. Then, study this market and look for patterns. Try out some simple strategies using the nextmarkets trading demo account or historical data. For example, you could choose to focus on USD/GBP. Then, you could calculate lines of support and resistance to give your analysis some context.

When picking a primary strategy to focus on, choose something where the logic makes sense to you. There is no reason why you can’t start by using a Fibonacci pivot strategy if you want to, just make sure that you know exactly why you think it will work.

This will stand you in good stead going forward so that you know how to adapt and add to your strategy effectively.

Fact Check

Before you settle on the right strategy for your nextmarkets trading journey, have you made sure that you have all the facts straight?

  • There is no “holy grail” of Forex trading strategies – you are looking for one which works for you, not which works on its own
  • There are thousands of different strategies out there, but only look at the
  • Simple Forex trading strategies ones when you are first starting out
  • There are opportunists out there who will try to sell you a useless strategy, beware of offers which sound too good to be true.
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Using Software with your Forex Trading Strategies

It is possible to set up automatic trades on your nextmarkets Forex trading app or software platform. This means that you could get the software to execute your strategy for you, without you having to manually enter and exit trades.

This is something which is only advisable for experienced traders who have complete faith in their strategies to be profitable overall. For less experienced traders, technology can still be hugely advantageous. By inputting the indicators for your chosen strategy into an app or piece of trading software, you can be automatically notified when the market moves in a way which triggers your strategy.

This gives you the benefit of not having to monitor the markets constantly, but will also let you have the final say about whether to open or close a trade.

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Automating your trading strategy

One of the best ways of limiting your emotional instincts when it comes to trading is to set up some automatic trading rules. If you wish to seriously put your strategy to the test, you can set up a series of logical parameters in your nextmarkets Forex trading app, so your trading strategy is always executed to the letter.

This is the perfect way to ensure that you do not stray from your chosen strategy, but it does, of course, come with risks. If computers could really predict every movement in the market, human traders would no longer exist.

Automatic trades should be monitored, and adjusted or cancelled according to external factors which the computer is unaware of.

Forex Trading Strategies Revealed - Scams

Forex trading is complex. If it was simple, everyone with a bit of spare cash and access to the internet would be having a go. Be very wary of any products online which claim to make you money without you needing to do anything except enter your card details.

The age-old adage is true; if it sounds too good to be true, it probably is! If someone really had invented a product which read the markets accurately or even accurate enough to make decent returns automatically, there is very little chance that the owner of said product would be allowing you, an individual trader, to have access to it.

There are plenty of ways in which your nextmarkets Forex trading software can help aid your trading, but no product should be able to do everything on your behalf.

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Working Foreign Exchange trading strategies - Trend-Following

Even the most stable of markets will move up and down throughout the course of a trading day. Sometimes, these small changes may just be the beginning of a new trend, but often they are nothing more than a small fluctuation.

Trend-following strategies assume that once a trend has begun, it will continue for at least a certain amount of time. If you get your Forex indicators right, predicting these new trends in the market is one of the simplest and most effective Forex trading strategies out there.

It is particularly recommended for novice traders as these strategies are not as high-risk as counter-trending strategies, but many experienced trades will also favour this approach, including the best Forex broker. At nextmarkets, we set a good foundation for our traders to make the most of their forex strategies.

The components of a successful Forex strategy on nextmarkets

There are a few key components in forming the most successful Forex trading strategy on nextmarkets, they include:

  • Choosing your market carefully: pick a currency pair which has plenty of opportunities, and which makes sense to follow given your time zone and understanding of current affairs
  • When to enter: You need to determine rules as to which indicators to follow to enter a trade
  • When to exit: Similarly, you will also need to determine which indicators you will follow to exit a trade
  • Position Sizing: You need to know how much you are willing to risk on different types of trade, and how sustainable your positions will be going forward.
  • Tactics: Know exactly how you plan to buy and sell your currencies, and which technologies you plan to use to help you do this.
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Finding the best Forex trading tactics

Make a plan, and stick to it. If your logic is solid, and you have seen your strategy working in theory in your nextmarkets Forex demo account, trust that it is a solid strategy. It is much easier to test a strategy if you are consistent. Follow the rules you have laid out for yourself, and take careful note of what happens in each trade. If your trades are not as successful as you had hoped they would be, look for an element in each trade which you think may be responsible.

It could be that there as something you overlooked in your Forex trading strategy, but it could also be that you were foiled by an unpredictable and unforeseeable event which affected the market.

Successful Forex Trading Strategies - The 1-Hour Forex Strategy

For those who are short on time, and only have short periods when they can monitor their trades, the 1-hour trading strategy is perfect. This strategy only requires you to look back at hourly price data you don’t need to have studied the opening and closing positions of the market over the last days and weeks. Check your positions each hour through your nextmarkets app, and enter and exit the trades when the market price crosses over the lines of a “profitability tunnel”, which you will have predefined.

This strategy must be combined with trend analysis, otherwise, you run the risk of dipping in and out of the market whilst the price is hovering close around the tunnel markers. This can lead to small but persistent losses if you time your trades wrong.

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Did you know?

There are thousands of strategies out there, but not all of them will help you navigate the Forex markets on nextmarkets successfully.

  • You can set up your strategies digitally so that apps and software can tell you when your conditions for trading are met
  • No single Forex trading strategy will get it right every time
  • It is often people’s emotions which cause them to make a bad trade or to enter or exit the market too soon. Online broker strategies help to avoid this emotional response by giving you rules to follow.

Counter-Trend Forex Trade Strategies on nextmarkets

Counter-trend is a term used to refer to strategies which move in the opposite direction to the market trend. They rely on the idea that most of the changes in direction in a market are only short-term deviations, and that the price will turn around relatively quickly.

These strategies can be incredibly effective; “what goes up must come down”. However, as it is incredibly difficult to work out when exactly the market will change direction this strategy requires a large amount of capital to fund. The volatility of the market can change at any time, and it can be almost impossible to tell how long a change in direction might last. Traders will need to keep an eye on their nextmarkets portfolio.

In Forex trading for beginners, novice traders are unlikely to be able to support these kinds of risks, and so it is recommended for beginners to stick to strategies which follow the movement of the markets.

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Best Forex Strategies Ever for Beginners

For beginner traders on nextmarkets, the simpler the strategy, the better. Follow the trend of the market, find your support and resistance levels, calculate your moving averages, and only invest small amounts of money. Follow this advice and you will have yourself a very simple beginner strategy for trading on the Forex markets. If you need a refresher about these terms, read through What is Forex?

PayPal Forex Brokers will usually have plenty of advice and support on their trading platforms, so make the most of this. Absorb as much information as possible, and be vigilant. As you start trading you will start to notice patterns and indicators which can form part of your strategy going forward.

Don’t be afraid to adapt your strategy, even the best strategies need to evolve as the markets grow and change.

List of Forex trading strategies

Here are some of the most common Forex trading strategies that you will hear about on nextmarkets:

Scalping Strategies: Trades which involve holding positions for incredibly short amounts of time, making the most of very small fluctuations in price.

Day Trading Strategies: Only opening and closing trades within the course of a trading day. Day traders will have exited all of their trades before the market closes for the evening. (For more information, check out the article forex trading hours)

Swing Trading Strategies: Trades which involve holding positions for several days. Swing traders aim to benefit from short-term trends and price patterns.

Positional Trading Strategies: Trades which aim to profit from long-term, and therefore sizeable, changes in the market price. Positional traders may hold their positions for many weeks or even months.

Forex Strategies Revealed with nextmarkets

The key to finding a successful strategy for your Forex trading is to make it simple. If you don’t understand your logic from the beginning, you stand no chance at keeping up as it becomes more complicated over time. Start small, with a few rules and small amounts of money. You can add extra rules as you start to feel more confident, and start spending more money as your success rates increase.

Be consistent, don’t act outside of the rules of your own strategy, but make permanent changes to the rules if you need to. The best strategies will evolve over time so don’t be scared to amend your rules or add new ones when signing up for your nextmarkets account.

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Managing Risk with you Forex Trading Strategies on nextmarkets

Regardless of which strategy you choose on the nextmarkets platform, you will need to put some parameters in place to make sure that you can not lose money as quickly as you are able to make a profit. There are some common sense best practices which you should follow as standard eg. don’t invest more than you can afford to lose at any one time and don’t assume that the market will move in your favour.

However, you should also build risk limitation into your strategy. Set yourself a bottom line so that you know when to cut your losses on a trade.

Set up automated alerts on your Forex signals app to tell you when you are approaching this limit. You can also set up stop-loss orders to limit your losses automatically.

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