You are fairly new to the forex day trading market and you have been told that you must learn in-depth technical anaylsis if you plan to have any success. Maybe you have visited some forums online or purchased books on trading forex strategies. You have heard that a person can make a living from home trading the market and you think that you could be successful too. But as you start learning, all the technical mumbo-jumbo seems like a foreign language.
You also think that perhaps you need a degree in calculus or stastics to be successful. You wonder, “Are there any simple forex strategies that work? ” Intuitively you know that trading forex does not have to be as complicated as it sounds in the “textbook” analytical trading courses. You just wish you could find strategies explained in simple terms that you can start applying and profiting from soon.
If you have had these thoughts, I can certainly relate. I wondered the same thing when I was 3 to 6 months into my own trading experience. So what is the answer? Are there any simple forex strategies that actually work? Of course there are. In fact, developing an effective forex strategy involves just 3 things.
1. Determining when to enter the market.
2. Determining where to set your stop loss.
3. Determining when to exit the market.
A good forex strategy will use some level of analysis to make the above decisions about how to trade. That’s it.
Furthermore, the truth is – you can implement someone else’s strategy – but the most successful traders have often developed their own strategies or modified a proven strategy to make it work for their unique trading personality and trading style.
One very simple strategy which has become my favorite is the forex breakout strategy. This is a strategy by which you are able to use free technical analysis charts online, and each day you are given multiple recommended entry points for all of the major currency pairs. You can then decide at which points you could enter, and you can also estimate how many pips you are likely to gain if you enter the market when the currency pair “breaks through” the indicated point.
You can also estimate exactly how much you will have to risk if the trade initiates. Because there are many possible entry, stop loss, and exit points each day across all the major currency pairs, you can choose the trades that you wish to take according to the time of day that you trade and by how much you are willing to risk. You can also set limit orders based on the breakout points and thereby follow a successful trading plan without being tied down to your computer.