10 Basic Forex Trading Strategies

1.) Charting Trends and Price Ranges Markets

Use long-term charts to decide between trends or fluctuating
markets. Analysis begins with daily, weekly, monthly, and even
charts tracing several previous years. A large-scale chart shows
essentially the life of the market and provides a much clearer
picture of long-term market perception.
Once you have drawn the joint long-term, you can draw some
short term charts. Remember that the factor of chance in Forex is
much higher among shorter terms within a chart. Its better to
trade in the same direction as the trends in the medium and long
term, even if it only operates at a very short notice. If there is a
strong and definite trend, it is necessary to move on to other types
of strategies.
2.) Follow the Trend
Once established, you only need to open positions in the direction
of the trend. Market trends can be long, medium or short term.
You must first decide what kind of strategy you want to follow: a
long-term or shorter time. This decision will determine the type of
charts to use. But the strategy will always follow the trend.
Should there be an upward trend regressions are expected in the
price to buy a pair, to ensure a good entry price. In case of a
downward trend, wait for a recovery in the price, before selling the
coins. Market trends can be long, medium or short term.
3.) Locating Support and Resistance Levels
Find the support and resistance levels. Its best to buy near
support levels and sell near resistance levels. The resistance
level is usually a peak above the previous high.
When resistance is finally broken, it automatically becomes a
support. Likewise when a support is finally defeated, it becomes
in turn a resistance.
4.) Retracements and Corrections
Generally the market correction, up or down, runs a significant
portion of the previous trend. Corrections can be measured in an
existing trend in simple percentages. A fifty percent trace above
trend is the most common. The Fibonacci retracements of 38%
and 62 % are also two of the highest levels followed by investors
in Forex, including the biggest players, such as banks or financial
institutions.
5.) Trend Lines
One of the simplest and most effective charting tools is trend
lines. Draw a straight line connecting two points on the chart. If
the trend is upward, a line is drawn below connecting two or more
low points.
If the trend is down, a line is drawn over the chart also connecting
two or more high points. Prices often respect these trend lines
when approaching them. When a trend line is broken, this is often
an indication of a change of the mainstream.
6.) Moving Averages
Moving averages often provide signals to buy and sell, which is
why it is important to keep in mind. With the help of moving
averages, it is possible to determine the state of a current trend.
One of the most common ways to use moving averages is the use
of two different averages in the same chart, and wait for the
crossing of the averages. If for example we have an upward trend
and the prices were in a correction, at the time that a faster
moving average (e.g. 10-day) crosses above a slower moving
average (20 days for example), this it is probably a good buy.
7.) Oscillators
These help us identify the markets in a state of overbought or
oversold. While moving averages provide a confirmation of the
market trend, oscillators can often tell the right time to open a
trade.
Two of the most common oscillators are the Relative Strength
Index (RSI) and the stochastic. The two oscillators operate on a
scale of 0 to 100. When the RSI is above 70, there is an effect
upon purchase, and when it is below 30, indicative of no over
booking. The values of overbought / oversold stochastic are 80
and 20.
One of the most useful signals that provide the oscillators are the
famous divergences. A divergence occurs when the direction of
the oscillator signal differs from the direction of the same price.
Such situations are usually a strong indication of a change in
market trend.
8.) Moving Average Convergence-Divergence
Moving Average Convergence-Divergence (MACD) combines a
moving average crossover with moving elements overbought /
oversold oscillator. A buy signal occurs when the faster line
crosses above the slower line, both being below zero.
Conversely, a sell signal occurs when the faster line crosses
below the slower line, both being above zero.
The MACD histogram determines the difference between the two
lines and gives an early warning of changes in the trend. This is
called a histogram and uses vertical bars to show the difference
between the two lines.
9.) The Average Directional Movement Index
The Average Directional Movement Index (ADX) helps determine
whether a market is in a trend phase or is oscillating between
ranges. This tool measures the strength of a trend or market
direction, but does not indicate the direction. For that you should
use other indicators or tools. Generally, a reading above 25 is an
indication that the market is in a strong trend, but fluctuating
between ranges.
10.) Further Training
Training in technical analysis is essential for every investor. Only
you can improve and refine through practice and experience in
this market. Continued reading and training is very important to
find successful forex strategies which work best for you. If you are
new to forex you can find basic strategies for beginners online
Remember trading based on technical analysis also helps us to
focus on our objectives and prevents trading forex based purely
on emotions and impulses. Discipline is essential to achieve
success with your forex trading strategies.