Trading Tutorial – Easiest Trades to Learn

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Trading Tutorial - Easiest Trades to Learn

Trading Tutorial – Easiest Trades to Learn

In the world of financial markets, there are so many strategies and methods to implement in your trade career to increase profits. But what are the easiest trades to learn for beginner traders? Here are some ideas and explanations of each of these strategies.

Easiest Trades to Learn – What Are the Easiest Trades to Learn

Here are the best strategies for beginner traders that are very effective and can bring you decent profit if you grasp them as much as possible.

Easiest Trades to Learn – Trend Trading Strategy

A trend-following trading strategy is one of the easiest trades to learn and one of the most popular choices among Forex traders.

Trendlines let you focus on price movement while keeping your charts free of messy indicators that look like a 5-year-old’s painting.

Remember that trend lines are not the holy grail when developing a Forex trading strategy. It is simply a tool to help you identify trends and make smart risk management decisions when the market indicates a change.

Easiest Trades to Learn – how To Use Trendlines: Breakout and Reversal Strategies

With the Auto Trendline indicator helping to effectively identify and draw lines on your charts, let’s see how to use trendlines in your trading activity.

Like all trading strategies that employ support and resistance lines, effective trendline trading can be classified into two categories:

Breakouts: Price no longer respects the trendline and breaks through support or resistance.

Reversals: Price follows the trendline bouncing off its support or resistance.

Easiest trades to learn – Range trading strategy

The range trading strategy has become more and more popular lately.

Range trading is a forex trading strategy that identifies overbought and oversold currencies, i.e., buying during periods of support/oversold and selling during periods of resistance/overbought. This is one of the easiest trades to learn and a type of strategy that can be implemented almost any time. However, it is best used when the market has no distinct direction. It is most effective when the Forex exchange market has no real long-term trend insight.

What is Range Trading

Range trading is an active investment strategy that identifies a range at which the investor buys and sells over a short period. For example, a stock is trading at $55, and you think it will rise to $65 and then trade in a range between $55 and $65 over the next few weeks.

Traders can attempt to trade it by buying the stock at $55 and then selling it if it rises to $65. The trader will repeat this process until they believe the stock will no longer trade within this range.

Easiest Trades to Learn – Breakout Trading Strategy

What Is the Breakout?

Source: freepik.com

 

If we look up the word “Breakout” in the dictionary, we see it’s synonymous to “burst.” We could therefore define this term as a graphic rupture of something.

Yes, but what? There are several possible breakouts, and we will see them later. A breakout is interesting because a fairly strong price movement often follows it.

In addition, a strategy based on breakouts does not require an indicator; you just need to know how to recognize them on the chart. Now let’s see how.

Types of Breakouts

Outputs of technical figures. In the case of technical figures, the breakout represents the figure’s exit and, therefore, the price release. It can be one of the trend lines that framed the pattern or the breakout of a neckline.

- Breakouts of support or resistance. A title that has broken free and is above all heights has nothing to stop it. But to do this, it is necessary to identify these important levels.

- Trend line breaks. The breakouts that I look for the most are because they are easy to recognize and offer great opportunities!

In our opinion, a good breakout must be obvious! The longer and tighter the correction period, the more powerful the explosion after the breakout will be. This rule is not based on anything concrete, but experience has shown that it is rather true!

A huge advantage of trading breakouts is that you will also be one step ahead of indicators that are always a little behind.

Easiest Trades to Learn – Momentum Trading Strategy

Who has never dreamed of systematically beating the market? You might rightly think that any anomalies that lead to higher returns in the financial markets would be quickly exploited and corrected. In reality, this is not necessarily the case! The Momentum, well known since many researchers (including Titman in 1993) confirmed its existence in twenty countries, is a very good example.

So, does the resulting strategy offer a silver bullet?

Understanding the Momentum Effect

Not to be confused with trend following (the tendency for markets to move in a given direction), the momentum effect is the tendency for stocks to persist in their performance: stocks that have performed well past performance tend to outperform other stocks over the next period. Similarly, stocks with poor returns will tend to maintain their underperformance over the following period.

The Momentum strategy, which exploits this anomaly and consists of buying stocks that have outperformed over a recent period (generally six months or one year) and selling those that have underperformed, is particularly effective.

Benefits and Risks

Source: freepik.com

 

The Momentum effect, and the resulting strategy, are intimately linked to overconfidence behaviors characterized by self-attribution or individualism. Investors seeking to maximize their return in the event of a rise in prices place less and less importance on the fundamental characteristics.

It is clear that this strategy is effective. According to a study carried out by Titman in the United States over the period 1965-1989, the strategy’s annual return (adjusted for risk) is 12.83%.

This is not without risk: from time to time, the trend is reversed. Momentum strategies turn around and degrade the return expectation in the medium term. Similarly, such behavior can be the source of irrational, self-sustaining price increases and, in the worst case, the origin of a bubble.

At the risk of disappointment, it is impossible to beat the market continuously. This is neither rational nor conceivable. The Momentum strategy is also the subject of much criticism. One of the solutions proposed to improve the strategy would be not to obscure the fundamental aspect completely.

Easiest Trades to Learn – News Trading Strategy

Here is one of the easiest trades to learn in today’s financial markets.

There are four main strategies for news trading, the specifics of which we will explain to you below:

Trading Initial Reactions

We are waiting for the publication of the stats. Depending on the current figures, one enters the market or not if the deviation is large enough.

We then try to capture the maximum of the first initial reaction movement (40-50 pips).

We place a stop 15 pips from the last pre-release sub.

Trading Retracements

We are waiting for the publication of the stat, and we are waiting for the maximum point of the initial peak. We then wait for a retracement of 10-15 pips (sometimes more with the big impacts) to position ourselves if the deviation confirms the trade.

It will be necessary to place a stop loss at approximately 15 pips from the entry point of the trade.

This type of news trading is easier and less risky, but sometimes there is no retracement or no sufficient retracement.

Pre-News Trading

This is to take advantage of a possible “boost” that a stat would offer to an ongoing technical trend.

It is, therefore, necessary first to define the current technical trend.

Then, you have to enter the position 5 minutes before the publication of the statistic, in the direction of the current technical trend.

Suppose the statistic goes in the current trend direction and the deviation is enough. In that case, the previously current trend should accelerate.

If the stat goes against the trend, you will have to experience the initial counter move. Still, the technical trend will generally resume (if strong enough) within 2-12 hours after the initial peak (or trough).

Attention! Do not practice pre-news trading with just any stats! Some statistics, like the NFP, are so important that they may warrant technical trend reversals if the deviation is large. In this case, the pre-news trading strategy is invalid.

Trading Market Sentiment

Market sentiment is arguably the most complicated news trading method. It’s basically riding the market sentiment generated by fundamental news in general, not trading any particular news in the short term.

In fact, it’s not even really news trading. We trade here more the anticipation of the news than its impact.

But it’s not as easy to learn as profiting from short-term news. It takes experience. Here we’ll just provide you with some basic rules and principles that you can rely on to build your own experience.

Easiest trades to learn – Carry trade strategy

The carry trade (carrying strategy) is one of the oldest and easiest trades to learn on the foreign exchange market, long before the floating exchange system. So, this is an arbitrage strategy that consists of taking advantage of the interest rate differential between two currencies.

The basic operation of the carry trade consists of borrowing a currency with a low-interest rate to place the borrowed sum in a currency with a higher interest rate. The holder of this strategy will therefore collect the interest rate differential applied to the amount borrowed between the borrowed currency (the “funding” currency) and the investment currency (the “carry” currency).

Profitability of the carry trade

The interest rate specific to each currency is linked to the interest rate charged by the country’s central bank. Naturally, you will not apply the key rate. Still, you must take into account the overnight rate of the money market, itself directly under the influence of the central bank’s key rate.

Once the carry trade operation has been initiated, you earn the difference between the interest rates of the two currencies in question each evening. Your Forex broker will be responsible for passing on the credit interest or the debit interest to your Forex account’s balance.

It would be best to keep in mind that for the interest to be credited, the rates at which you borrow currency A) must be lower than the rate received (the rate at which currency B is placed).

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