5 Best Trend Trading Strategies for Beginners.

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Did you just begin Forex Trading in Olymp Trade?

Then chances are, you have traded with the naked eye, lost, and are now looking for best beginner forex trading strategies to improve your winnings. 

And what if I told you that you are reading the most relevant article, would you believe me?

In this post, we introduce you to the best trend trading strategies for beginners.

5 Best Trend Trading Strategies for Beginners.

In Forex Trading, the trend is always your friend.

Both beginners and experienced traders have found themselves befriending the trend for the so many trading opportunities it avails.

Here are some of the best trend trading strategies to look out for in this post.

  • Directional Bias Strategy.
  • Moving Average Strategy.
  • Price Bounce Back Strategy.
  • Breakout Strategy.
  • Pullback Strategy.

1. Directional Bias Strategy.

Directional Bias Strategy is a simple forex trading strategy.

It is a trading technique that involves identifying a primary trend and then confirming such a trend direction using various analytical tools.

If the direction of the trend is confirmed successfully, you then have established a Directional Bias. You can therefore place trades in that direction without having to react emotionally to the market.

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An upward Directional Bias is identified by a price action that posts higher highs and higher lows.

It is confirmed by upward moving average crossovers, a rise in the value of momentum indicators and the price trending above certain moving averages. Once you identify and confirm and upward Directional Bias, enter a Buy position.

A downward Directional Bias is identified by a price action which posts lower highs and lower lows.

It is confirmed by downward-moving average crossovers, a fall in the value of momentum indicators and the price trending below certain moving averages.

After identifying and confirming a downward Directional Bias, enter a Sell position.

As it is clear, an upward directional bias capitalizes on trading an Uptrend while a downward Directional Bias capitalizes on trading a Downtrend.

Downtrend on Olymp Trade

2. Moving Average Strategy.

Moving Average Strategy is one of the best forex trading strategies for beginners. They have been used over time to develop basic trading strategies.

Two moving averages, one with a shorter and one with a longer period are commonly applied to form trading strategies. Exponential Moving Averages (EMAs) are preferred over other types of moving averages for their reference to the most recent data.

Moving average crossovers, price action in relation to the moving averages and the use of an additional indicator like the Relative Strength Index (RSI) are common trading techniques.

Buy when:-

  • The shorter period Moving Average crosses over the longer period Moving Average from below upwards.
  • The price keeps trending above that shorter period Moving Average.
  • RSI shows an oversold condition, a bullish divergence or convergence or any hint to a rise in the price.

 

Sell when:-

  • The shorter period Moving Average crosses over the longer period Moving Average from above downwards.
  • The price keeps trending below that shorter period Moving Average.
  • RSI shows an overbought condition, a bearish divergence or convergence, or any hint to a price fall.

You can see that Buy positions are entered to profit from an Uptrend while Sell trades are entered to profit from Downtrends.

3. Price Bounce Back Strategy.

This is one of the common Forex Trading Strategies for beginners. Prices will tend to rise or fall away from Moving Averages. However, when they hit the EMAs (especially shorter period moving average), they tend to bounce back.

Use a 9 period and a 21-period Exponential Moving Averages, for example. The price crosses the two moving averages and begins to trend above them. EMA 9 also crosses over EMA 21 to be above it and closer to the up-trending price.

The price is trending upwards and chances of the price going up are higher than the chances of the price falling.

If then the price falls to the point of touching EMA 9 or even EMA 21, then you expect the price to bounce back upwards. Once the price touches the EMA, enter a Buy position. Do not buy before the price touches the EMA.

The same thing applies if the price crosses to trend below the moving averages and EMA 9 crosses over EMA 21 to be below it and closer to the down-trending price.

The price is trending downwards and there are more chances of it falling than rising. If it rises to the point of touching EMA 9 or EMA 21, then the price is most likely to bounce back downwards.

Once the price touches the EMA, enter a Sell position. Do not sell before the price touches the EMA.

#4. Best Trend Trading Strategies – Breakout Strategy.

This is one of the common forex trading strategies.

Prices of assets move in certain patterns and channels whose limits can be determined. By observing, determine a level where the price does not tend to go past upwards and downwards based on past action of the price.

Combine Breakouts with a technical indicator like the Relative Strength Index (RSI) for better results.

Buy if all the conditions below are met:-

  • The price has broken the upper predetermined limit.
  • The price has tested the new level several times without breaking it back downwards.
  • RSI may be showing a reading below its lower limit (Oversold) or an increase in value from below upwards.

Sell after all these conditions are met:-

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  • The price has broken the lower predetermined limit.
  • The price has tested the new level several times without breaking it back upwards.
  • RSI may be showing a reading above its upper limit (Overbought) or a decrease in value from above downwards.

You can see that trading breakouts capitalize on the trend occurring in the direction of the breakout, whether upwards (Uptrend) or downwards (Downtrend).

5. Pullback Strategy.

The pullback strategy is another common Forex Trading Strategy that relies on identifying pullbacks in order to sell or buy after the pullbacks.

In Uptrends and Downtrends, the price is interrupted by attempts to reverse in the opposite direction.

Pullback on trends

These counter-trend movements are what we call Pullbacks.

The price rallies in the opposite direction for a short while then the primary trend resumes, whether Uptrend or Downtrend.

Uptrends are interrupted by downward before the uptrend resumes while Downtrends are interrupted by upward pullbacks before the downtrend resumes.

A bullish pullback occurs when the price on an Uptrend tends to reverse downwards for a short while. Consecutive bearish candlesticks followed by a bullish one that closes above the high of last pullback candlestick will give a Buy signal.

A bearish pullback occurs when the price on a Downtrend tends to reverse upwards for a short while. Consecutive bullish candlesticks followed by a bearish one that closes below the low last pullback candlestick will give a Sell signal.

As it is clear, trading pullbacks capitalizes on trends occurring in the direction opposite to that of the pullback – the primary trend before the pullback occurs.


*Risk warning:

The information provided does not constitute a recommendation to carry out transactions. When using this information, you are solely responsible for your decisions and assume all risks associated with the financial result of such transactions.
******

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Kenn Omollo is an investment writer and a business management consultant at Joon Online Limited. Reach him at - kenn@joon.co.ke

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