If you are looking for an easy forex strategy, that means you have looked at all the tutorials, systems and strategies and have found them wanting.  What you probably concluded was that they were all too complex and would be impossible for you to trade with.

If you have come to this realization, that means you are honest with yourself, know your limits and have a realistic view of what trading is all about.  This also means that you realize the best forex trading strategy is one in which you can trade easily and competently.

Different forex trading systems will make more sense to some more than others.  Here are a few forex trading strategies that make sense to me and ones that I feel comfortable with.  Just as a note of advice.

The simpler your strategy is, the less trading opportunities you will have.  That is a good and bad thing.  You can’t chase all the good trades that are out there.  That is impossible for one person to do.  But if you can’t find any entrance opportunity, or can’t find one on a regular enough basis, you will not be active enough to make any more.  The other thing that might happen is you might become delusional and see trading opportunities that are actually not there.

A strategy with moving averages (MA) is a great way to start out.  Moving averages are a way to smooth out prices to spot trends.  You basically decide what period you want to look at.  If you’re looking at a 30-day moving average, you will take the closing prices of all those days, add them up and then divide by 30 and plot them on your chart.  That is how it is calculated, but you don’t have to do it yourself.  Most charting platforms will have this function.

One way to use this is to look for crosses.  When a short term MA crosses above a long term MA, you might see a coming trend.  If you see the short term cross below the long term, it might be a bearish sign.  A common one that is used is the 50-day and the 200-day MA’s, which is often called the golden cross or the death cross.

Once there is a crossover, you should wait for a bit and make sure that the trend is real.  Sometimes the prices and the trend will whip back and will be a false forex trading signal.

Features

First of all, let’s look at why people use them to begin with.  The main reason is because of it’s streamlined quality.  Now what initially attracted forex traders is the idea that they can have an automated forex trading system do all of the work for you.  In many cases, this is also how they are advertised.

With some automated forex trading software packages, it comes with a preprogrammed set of parameters for trading.  They have their own system of forex trading signals that they use to execute your orders.

These forex trading systems also come with the ability to program the commands yourself.  The commands will be based on a set of paramaters for entering and exiting trades that you give it.  This can be a great advantage if you have figured out a relatively simple forex trading strategy that you can rinse and repeat using a software program.

Benefits

One of the real benefits of using automatic trading systems is that you take the human component out of trading.  Every successful trader knows that the biggest enemy to profits in this game is the trader himself.

The reason many great trading plans go awry is because of the human emotion.  The power of fear and greed are so powerful that many traders get tripped up, hesitate to make important trading decisions and eventually fall on their face due to their lack of self-control.

In addition, like I have said before, if you have figured out a system that consistently makes you money, you can use an automated forex trading software system to do it for you.  Then it would give you time and space to go on to other bigger and better endeavors.

Word of Caution

Let me offer you a word of caution.  The reality is that there are a very few ways to repeatedly make money in the forex market.  One strategy that may work right now may not work next month or next year.  You have to be careful when you are thinking about using one of these systems.  Even the best forex trading system will fail at some point.  The objective is to use it to make money consistently over time.

In addition, these platforms will completely ignore fundamental variables.  If there are fundamental factors that are moving the markets, an automated trading system will not pick it up or even consider it.  That is when you, as a live human being, will have to step in and make the necessary adjustments.

An estimated 70-98% of trading activity in the currency market is speculative.  That means a majority of the trading that happens in this market is strictly for profit.  Only a small percentage is traded for end use, i.e. buying CAD so you can buy oil and other commodities, or for hedging risk.  The rest is traders trying to make a profit on the fluctuations in the market.

Strategies for hedging and risk management are different that those of speculators.  I will mostly focus on forex trading strategies that are used by speculators.  Included are some forex trading tips for new traders.  It’ll help you get started and point you in the right direction or help you decide not to engage in that particular strategy.  This is a general overview of the strategies and systems that people use.  You can find more detailed information in the rest of this website.

Forex Margin Trading

Virtually all day traders use a margin account to do their trading.  Using a forex margin account essentially allows you to leverage a relatively small amount of your money to trade with your forex broker’s money.

Most leverage ratio’s are 100:1.  That means you can trade up to $100 for every $1 of your money you have on deposit.  It will most likely look like you putting $1,000 on deposit giving you the ability to trade as much as $100,000 on the market.  Some broker’s offer leverage as high as 200:1.

This allows you to be able to make significant profit on very small, incremental changes in currency exchange rates.  There aren’t many days in the forex market that offer the extremely volatile fluctuations that would give a trader an opportunity to make big profits.  Most days exchange rates fluctuate only fractions of a penny.  Without margin trading, most traders would not be able to make significant profits with strictly their own funds.

Forex Arbitrage

Another popular forex trading strategy is doing arbitrage trading.  This essentially exploits any market price inefficiencies in the market.  Forex arbitrage has to be a quick trade because as other traders identify the inefficiency, the opportunity quickly vanishes and the market is corrected.

In real life, it usually involves 3 or more different currency pairs.  It can also be done by taking advantage of rate differences among different forex brokers.

However you do it, it can be a very complicated trade.  You can download a forex arbitrage calculator to quickly process the rates for opportunities.  There is also automated platforms to help you execute these types of trades.  Most traders use arbitrage as just one among other forex trading strategies because opportunities may not always be readily available.

Forex Managed Account

This is the lazy man’s way of trading the market.  Forex managed accounts are like mutual funds in the forex market.  You basically let a money manager trade your money on the market on your behalf, and then pay him a management fee to do it.

This is a great strategy for someone who wants to profit from this lucrative and active market, without having to learn how to trade and without having to sit in front of a computer monitor all day.  These managed accounts are run by highly skilled and experienced currency traders.  You end up leveraging their assets to make money.

Technical Analysis

Most looking to make a profit speculating in this market use technical analysis to find trading opportunities.  This strategy looks at chart patterns like head and shoulders or trend lines to identify trades.  This strategy also analyzes things like the Elliot Wave, Fibonacci ratios and moving averages (MACD) to predict price movements.

Fundamental Analysis

Fundamental analysis looks at economic data and global events to trade the market.  This would consider announcements and actions taken by government central banks like the US Federal Reserve or the Bank of England, to make their trades.  It would look at jobs reports and consumer spending data in developed countries, GDP growth rates in developing countries like China and world commodity prices to make determinations on how the currency market will behave based on fundamental elements.

In the fundamental analysis approach, you should master one or two currency pairs to begin with and learn all of the factors that cause it to move.  For example, the Canadian dollar (CAD) is heavily reliant on commodity prices for it’s value.  So when there is a global boost in production and there is an increasing demand for commodities like oil, the CAD tends to rise with it.

Keep it Simple and Become a Master

The last thing I would say as you develop your forex trading strategy is to keep it as simple as possible.  It is easy to overcomplicate things, especially in doing something like this.  But try to keep it as simple as possible to a level where you will be able to execute your strategies well.

Also, make it your goal to master one or two strategies that will work for you and you are able to be successful with.  This will allow you to keep your focus and have a better chance of making money in the end.

In addition, whatever strategy you employ, make sure you practice it first one a forex demo account before you trade real money.  Paper trading will help you figure out if it is the right method for you.  But if you never practice, a broke account might be what makes the decision for you.

They are the units of change.  For most currency pairs, it goes up to 4 digits after the decimal point.  For the Japanese Yen (JPY) the forex trading pip is two digits.

So for example, if the USD/CAD is at 1.0455 and it changes to 1.0460, we say that it has gone up 5 pips.  The forex profit by the change in pips.

The reason it is so minuscule is because currencies are traded at very large volumes.  The standard lot for forex trading is 100,000 units.  A mini lot would consist of 10,000 units.  So when you are trading 100,000 units of EUR/USD, even a fraction of a penny will make a significant difference.

Profit and Loss Calculation with Forex Pips

So here is how to calculate your profit and loss based on the forex pip value.  Let’s say you are going long on USD/CAD and it is currently at 1.0422.  You buy a standard lot of 100,000 units for a total trading position of 104,220 (100,000 x 1.0422).

Now let’s say the USD/CAD goes up to 1.0480.  It just went up 58 pips (1.0480 – 1.0422 = 58) and you sell.  You just made $580 (.0058 x 100,000).

Forex Margin Account

Now it may seem like trading 100,000 units or even 10,000 units of currency would be out of the question for most individual retail traders.  Besides, what average joe trader can afford that much trading capital.  The answer is that most traders use forex margin to increase their trading power.

The downside to forex margin trading is that you must always have a certain amount on deposit in proportion to your trading position.  If you’re trading position is losing, you have to have enough in your margin account to cover the requirement your forex broker determines for you.  If you don’t, you might get your trading position closed out.

Importance of Calculating Profit and Loss

Most forex trading platforms automatically calculate your profit and loss for you, but only on trading positions that you have entered.  It is important for you to understand how to calculate forex pips and profits so that you can develop your forex trading strategies accordingly.  If you can’t anticipate profit and loss, you are not building a solid trading plan.

That also means you might not have enough in your margin account to accommodate normal volatility that happens in the forex market.  If you calculate it beforehand, you can know how large of a position you can enter without getting prematurely closed out of your trading position.

One of the best set of introductory tutorials can be found on Forex.com, one of the biggest brokers out there.  They have a very comprehensive list of topics and videos to get you started.  The following are the topics that are included in the tutorials.

Beginner Videos

The beginner videos start out with an introduction to the forex market in general.  It’s a primer to give you a brief overview of the subject.

Then it goes on to tell you about the currency pairs.  It talks about which ones there are, and how they work.

The next video talks about how you can understand currency exchange rates and forex quotes.  Prices in the forex market are not as straightforward and simple to understand as stock prices.  This video helps clarify how it all works.

Finally, the beginner videos end with a explanation of pips.  Pips are how forex quotes are measured and calculated.  They are the units of change in currency pair rates.

Advanced Videos

Forex.com also has a set of advance videos.  They start out talking about risk management.  This is an important component to trading.  It’s not all about predicting price movements, although that is a huge part.  Money management is also a huge part of all good forex trading strategies.

Then it talks about Japanese Candlestick Formations.  This is a technical analysis strategy that helps predict price movements.  It’s an ancient form of technical analysis that was first used in Japan by rice traders.

Support and resistance is the next video.  It talks about how to spot trends and sideways channels.  It also talks briefly about how you can use support and resistance to identify trading opportunities.

Next is a video on Fibonacci Retracement, which is another technical tool used by many traders.  It uses an algorithm discovered by a mathematician named Fibonacci who recognized certain patterns and ratios that were in many aspects of life.  This is the forex trading adaptation to his mathematical theory.

Then the tutorials end with another technical analysis tool called triangle chart patterns.  It’s another method of finding trading opportunities.  It’s a spin off take on support and resistance trading.

All the videos are less than 3 minutes long.  They offer a great introduction to what you need to know to start trading and to point you in the right direction with more learning.

Forex.com also offers a great forex demo account so that you can practice before you start trading for real.  It’s a great way to apply what you’ve learned without taking on real risks with your money.

Don’t Get Scammed

This is a potential trap for especially new traders.  There is so much stuff out on the internet that are forex scams.  I’m putting this first because the scammers are so aggressive that if you are new, more than 50% of what you encounter will be some sort of scam.  The prevalence of scams and misrepresentations is why I’m offering these forex trading tips first.

So how to you decipher between a legitimate website or someone trying to fraud you?  Well, it takes a little common sense.  Sometimes you can just feel it in your gut.  I know that many people don’t have this intuition to smell out a scam, so here are some guidelines for you to consider.

First of all, are they advertising earnings that seem too good to be true.  Let me just say, not all things that seem too good to be true is a scam.  In fact, I think this mentally keeps people from really reaching their earning potential sometimes.  But with forex trading stuff, this is the first filter it needs to go through.

With forex trading scams, the first question you need to ask is if this system makes so much money, why is he trying to sell it to me for $19.95?  If a forex trading system is that easy and makes that much money, I guarantee you, there is no reason for him to want to share it with anyone, even for money.

The legitimate forex trading strategies and systems out there are hard to learn and they are hard to execute.  In addition, although there are ways to reduce your risk, there is no full proof trading method.  They are all risky and takes a certain level of skill that you must develop.

Find a Forex Strategy That Works For You

Not all trading methods will be good for every trader.  Every trader has his own temperament, style and personality.  They also have their own level of intelligence and capabilities as a trader.

Some currency traders are super intelligent and can run complicated mathematical calculations in their head in the middle of an open trading position.  Most people can’t do that.  That means those people shouldn’t be using the same strategies as the mathematical geniuses.

Practice Like Mad

You need to know what you are doing to survive in the forex market.  If you can’t stay out and do forex investing instead by letting someone else trade for you.  But if you are going to trade, you need to know your stuff.

Always test and practice your strategies before you trade.  That means you need to get a forex demo account and practice until you are good enough to use real money.  This will save you a lot of time and heartache.

Forex Margin Account

The forex market has relatively very little volatility.  In any given day, a currency can change by just fractions of a penny.  That means you would need a very large open trading position to make any decent money.

In an effort to make forex trading more accessible to individual retail traders, brokers offer margin accounts to those without millions of dollars of trading capital available.

Most offer at least a 100:1 leverage.  Some offer as high as 200:1.  That means you would have $500,000 of trading power for a mere $5,000 deposit.  With a 200:1 leverage, that would be $1 million of trading capital.

Scaling and Building Your Trading Capital

If you have a set of forex trading strategies that is working, you want to make sure you get the most out of it by scaling it with your trading capital.  If you have a system that can make $10 with $100 of capital, that means you can make $1,000 with $100,000 of capital.

It also means you can make $100,000 with $10 million.  So your goal, so you can make as much money as possible, is to build your trading capital as much as possible.

If you have a system that works, the world is at your finger tips.  Having a working system means your earning potential is really just capped by how big your trading capital is.  At the point that you find a strategy that consistently makes money, your next task is to scale it so you can multiply your earnings.  You want as big of a forex trading leverage as possible.

Advanced Forex Leveraging

Another innovative way to leverage your working system is by starting a hedge fund.  You can also approach other forex funds and investment banks and do a deal to trade for them.  You would generally get a cut of the profits you made.  The upside for you is they would provide the trading capital.

Many investment banks hire out contract currency traders to trade for them.  It’s a more advanced way to go, but if you are a trader that makes good money on your own, it might be well worth it to have the backing of a large trading house.

There are many strategies out there to make money.  If you find one or some, you are very fortunate.  The next step is to build your leverage so you can make the most amount of money as possible.

More recently, I’ve been seeing ads that seem to be promoting a simple method that will make millions.  They tout that one little trick helped them make a lot of money in forex trading.  Well let me just explain why you should beware and cautious of these so called forex secrets.

Paradox of the Secret Sauce

First of all, it doesn’t make any sense why anyone would want to share their secret.  Successful businesses have what they call their secret sauce.  It’s some sort of trade secret that gives them a competitive advantage in their market.  If they reveal this secret, their competitors will come in like vultures and use it to even the playing field.

It is no different in the forex market.  You have to ask yourself a question.  Why would someone with a secret that makes them tons of money in forex trading want to share it with the world?  Trading houses and currency traders who do have a secret that works to make money doesn’t share it with anyone.  They just use it to make money.

Well, here is some speculation on what those reasons would be.

The first reason is simple, the secret doesn’t really work and they are trying to rip you off and make money off of you.  They’re looking to make a quick buck.  They may not even actually trade on the forex market at all.

Think about it.  If they were making millions on the forex market with their system, why would they be using cheap and conniving tactics to get you to pay $19.95 for their e-book?  It’s a simple matter of using common sense.

The only reason I can think of that someone with a working system want to legitimately want to share it is so the prices will go up more when they trade.  For example, if based on their system they expect the price to rise, if they have tons of other traders that think the same thing, the price will go up even more.  But even this doesn’t make sense because the currency market is so big that it won’t really make a difference anyways.

Why You Don’t Need Them

Here’s why you really don’t need a secret to begin with.  There are plenty of forex trading strategies out there that work.  They aren’t secrets.  They are just common, well-known, credible strategies that make many traders money everyday.

These are things like using a variety of forex indicators, Fibonacci retracement, etc., to make trades.  The fundamentals work, just like in any other trading world.

Learn Forex Basics

Don’t equate basics with useless.  Sometimes people skip the basics because they think it’s the complicated stuff that will make them money.  It is true that you have to advance beyond the basics to make a forex profit, but you need the basics as a foundation for what you’ll learn later.

The fundamentals are important.  Make sure you learn currency trading fundamentals first.  If you don’t have a grasp of them, you won’t have a framework for other things you will learn.  In addition, the best way to not get scammed is to understand how the fundamentals work.

Forex Trading Strategy or System

Then you have to pick a forex trading strategy or system.  Many people have developed ones that work for them.  You have to do the same.  You can try to mimic someone else’s strategy, but in the end, you have to make it your own.

In order to do this, I would develop a super easy and simple trading strategy.  Make sure it makes sense and that it is solid.  But also try to make it as simple as possible.  The simpler it is, the better chance you will have at making money.  To develop one, use one of the many forex trading strategies already out there as a starting point.

Forex Demo Account

Once you have developed a strategy that you can work with, test it on a forex demo account.  This is a super important step in the process.  You need to make sure that your strategy or system works.

Don’t trust someone else that it works.  Make sure you see for yourself.  Remember, it’s not their money you are trading, it’s yours.  Take ownership of that fact and test whatever system you are planning on using.

The other reason you should trading on a demo account first is to develop you trading skills.  There are many human components to trading that is impossible to gauge or hone in theory.  You have to have hands on experience.

One example would be your own emotion.  I couldn’t believe how emotionally intense it was to trade, even on a virtual trading platform.  When I first signed up for a $50,000 demo account and started trading, I had no idea the stresses I would go through, even though the whole thing was fake.

When I lost $5,000 in 10 minutes, I realized that this was not a game.  It helped me to take trading very seriously and it gave me respect for the market.

A couple of the more popular programs are the Shark EA, Griffen EA and ZuluTrade.  Each has there own trading strategies.  You should evaluate them closely before using them.  I would test each out with a small amount of capital for a little while before making it a significant part of your trading strategy.

Automatic forex currency trading systems are preprogrammed by the manufacturer to trade a certain way.  They monitor multiple forex indicators and market movements.  Then under prearranged conditions, they buy and sell for you.

There are also manual forex trading systems too.  These you can program yourself based on your own forex trading strategies if you have some that you have found to work.  This is more for experts and those who traded successful and want to maximize their results.

For the manual system, if you have multiple strategies that you like to trade, you can do them all at the same time with an automated currency trading software package.  You don’t have to do one at a time.

Most systems integrate with the popular MetaTrader 4 trading platform.  Some plug in multiple systems as a way to diversify.  If you have that much trading capital and that much money to spend on these systems, it wouldn’t be a bad way to go.  Spread your risk across multiple trading systems.  This wouldn’t be unlike investing in multiple forex managed accounts to diversify your risk.

Benefits

In both automatic and manual trading systems, you have the advantage of not sitting in front of the computer all day.  You can let the software trade for you while you are doing other things.  Also, like I’ve mentioned already, you can trade multiple strategies at one time.  Forex trading can be a very intense activity.  These systems take some of that intensity out for you.

Another advantage is that you can create a trading plan and stick to it, because you have to.  In many cases, traders are tempted to get off of their solid trading plan because of human emotions.  They get into a trading position and become irrational, simply because we are irrational beings, especially when it comes to money.  Automated systems take that component out.

Caution

There is an obvious word of caution to be had here.  Not all systems are 100% full proof.  In fact, if there was one that traded over-the-top successfully, why would they want to sell that to other people.  If there truly was a magic system, they wouldn’t be selling it.  They would be using it to make tons of money for themselves.

That’s not to say that there aren’t automated forex systems out there that trade pretty well.  But you still have to keep an eye on them to make sure they are working.  Although you can replace some of your functions, you can’t take the entire human component out of trading.