Forex Trading Strategies for Beginners
The Forex market is filled with hundreds of different trading strategies, but what are the best Forex trading strategies for beginners? This is a common question among traders just starting out and for good reason.
Itís often said that a beginning trader is closer to becoming consistent profitable than a trader who has been trading unsuccessfully for years. This is because a beginning trader hasnít had time to create any bad habits. The trader who has been struggling for years has to not only find what works best for them, but they also have to break any bad habits and put aside negative feelings they may have built up over the years.
But no matter if youíre a beginning trader or youíve been trading for years, there are a few price action trading strategies that you should always keep in your back pocket. I welcome you to read on and learn three trading strategies that have become staples in my trading plan.
#1 Pin Bar Trading Strategy
The pin bar trading strategy is perhaps the best Forex strategy for beginners. This is because itís a very obvious pattern, making it easy to identify on a chart. Itís also one of the easier strategies to trade.
Notice how the market came into resistance during a rally but was soon able to break through that resistance. One of the basic principles of technical analysis is that former resistance becomes new support. Sure enough the market found support at former resistance and formed a bullish pin bar in the process.
Letís take a look at a bullish pin bar that formed on the GBPCAD daily chart.
In the chart above, GBPCAD met resistance after an extended move up. Once the market broke through resistance, it found new support and formed two bullish pin bars. Shortly after forming these pin bars, the market continued its rally for an additional 370 pips.
For more information on this particular strategy, see the lesson on the Forex pin bar trading strategy.
#2 Inside Bar Trading Strategy
Another highly-effective Forex trading strategy for beginners is the inside bar strategy. Unlike the pin bar, the inside bar is best traded as a continuation pattern. This means we want to use a pending order to trade a breakout in the direction of the major trend.
Below is an illustration of an inside bar during a rally.
Notice how the bar preceding the inside bar is much larger in size. This bar is called the ďmother barĒ because it completely engulfs the inside bar. The real magic to this strategy comes after the consolidation period, which is represented by the inside bar, on a break of the mother barís range.
Below is an inside bar that formed on the USDJPY daily chart during a strong rally.
Notice how USDJPY was coming off of a very strong rally when it formed the inside bar on the chart above. These are the best inside bars to trade because it shows a true consolidation period which often leads to a continuation of the major trend, which in this case is up.
For more on this strategy, see the lesson on the inside bar trading strategy.
#3 Forex Breakout Strategy
The Forex breakout strategy weíre going to discuss here is a great trading strategy for beginners. This strategy is different than most of the conventional breakout strategies out there. Instead of simply trading the actual break of a level, weíre waiting for a pullback and retest before entering.
Another difference here is that weíre only interested in breakouts that occur from a wedge pattern rather than a horizontal level.
Here is an illustration of the Forex breakout strategy.
Notice how the market has worked itself into a terminal wedge, which simply means that the pattern must eventually come to an end. The opportunity to trade this pattern occurs when the market breaks to either side and then retests the level as new support or resistance. In the case of the illustration above, the entry would have come on a retest of support-turned-resistance.
Letís take a look at the same breakout strategy but this time weíll apply it to a USDJPY 4 hour chart.
Notice how in the USDJPY 4 hour chart above, the market touched the upper and lower boundaries of the wedge several times before eventually breaking lower. As soon as the 4 hour bar closed below support, we could have looked for an entry on a retest of former support, which came just a few hours later.
Although the pin bar trading strategy is my favorite, I have had some of my largest trades using the Forex breakout strategy above. The market will often react quite aggressively after the breakout occurs, allowing traders to secure a large profit in a relatively short period of time.
So there you have it. Three simple Forex trading strategies for beginners. These strategies are by far my favorite and for good reason. If used properly, they can quickly build your trading account into a sizeable amount. The best part is, they are extremely simple to understand and are therefore easy to incorporate into your trading plan.
Here are a few key points from the lesson:
- The pin bar trading strategy is best traded as a reversal pattern in the direction of the major trend
- The inside bar trading strategy is best traded as a continuation pattern
- The Forex breakout strategy should be traded after a break and retest of either support or resistance
- All you really need to become profitable trading Forex is two or three great trading strategies
Hello Justin, I like all your articles and I am still learning using demo account(daily chart). I just have 1 question: what is your opinion about long legged dojiís on the daily chart? They seem to be quite effective too. I have noticed, that sometimes it happens we see on all pairs a doji at the same day. Thank you.
Thank you for your comment. I donít pay much attention to dojis. I would rather see a strong rejection as either a bullish or bearish pin bar.
Sallam aleikum, Muhammad.
please, Iím new to investing in Forex, Iíd just like you to help me get through this beginner stageÖÖ.could you put to me the exact books you read on, or videos you watched that made you this knowledgeable about Forex or if you could take me on the journey yourself if it wonít inconvenient you because thereís a whole lot of materials out there on the internet that Iím just so confused now.
Love to hear from you soonest
Great post. I really like your work. It is a must read for all beginners.
Much appreciated, Jake.
Great post good information for trade beginners thank for sharing
Amol, youíre welcome. Let me know if you have any questions.
Your vivid article makes my idea clear about trends rejection and trend continuation. Would you please share which time frame is best suited for the candle pattern?
Hi Daniel, I use the daily chart for just about everything. Itís also a time frame Iíd recommend to those who are still searching for consistent profits.
Thank you for sharing the following tips. For those who are new to forex trading I would recommend to start trading in a simulation environment with zero risk (no real money). There are plenty of trading game apps which are good for beginners like Forextream, go forex etc. Good Luck!
Thanks for this wonderful article, you have opened my eyes to so many things.
Please can someone start with as little as $100 and still survive in forex market and how possible is that? Thanks
Very helpful article, thank you.
Very informative and easy to understand. Appreciate your willingness to share. Thank you.
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About Justin Bennett
Justin Bennett is a Forex trader, coach and founder of Daily Price Action, the world's most popular Forex price action blog. He began trading equities and ETFs in 2002 and later transitioned to Forex in 2007. His "aha" moment came in 2010 when he discovered the simple yet profitable technical patterns he teaches today. Justin has now taught more than 2,000 students from over 70 countries in the Daily Price Action course and community. He has also appeared in various printed material including an interview in Stocks & Commodities magazine.
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