Digital options and Forex trading requires a systematic approach, which means that all decisions that you make when placing trades should be weighted and informed. Professional traders use various strategies to become successful and capitalize on price fluctuations. A trading strategy allows traders to stay disciplined and find entry points in various market situations. By reading this article, you will find 9 of the best trading strategies for beginners that you can use when trading digital options and Forex CFDs. 

Try them and start making money by creating an account at Binolla!

Digital Options and Forex Trading Strategies Basics

First, let’s have a closer look at a strategy and its basics. A trading strategy is a set of rules and tools that allow market participants to find entry and exit points as well as control their trades throughout their lifetime. It can be compared to a business plan where all the important points are included.

Forex and digital options strategies are mostly based on technical analysis tools such as technical indicators, graphic patterns, price action, and others. A good strategy allows you to see when to jump into trading as well as when to close a position if you trade Forex CFDs. For digital option traders, the latter is not required as positions are closed automatically once the expiration occurs.

Why do you need a strategy? Trading randomly can also be successful occasionally. You can simply guess the direction of the price movement. However, to rely on better results, it is better to use a systematic approach. This will allow you to increase the number of profitable trades and make money over time. 

Now that you know more about the basics of trading strategies, let’s delve into the top 9 strategies for beginner traders. 

1: Price Action

Price action or Japanese candlestick analysis is a way to predict price fluctuations using the price itself without technical indicators. The range of price action strategies allows you to find entry points in most market situations. While most of them predict price reversals, some Japanese candlestick strategies allow market participants to find trend continuation patterns.

While price action strategies can be used independently, sometimes traders add technical indicators to make more informed decisions. Instead of many other types of trading systems where indicators are used to find entry and exit points, in price action strategies, they help traders confirm signals.

The benefits of using price action are that your charts remain naked and nothing prevents you from getting clear information about the price. Keep in mind that having several indicators on charts may give you conflicting signals that may lead to late decisions or mistakes, especially when it comes to beginners.

By adding any technical indicator, you can enhance your strategy. In this particular example, we have added RSI to be more sure about market reversals. After the price action pattern appears, we look at RSI and see that the line leaves the oversold area, which is a signal that the market is going to reverse. 

Traders can buy a Higher contract in this case or purchase an asset. Keep in mind that Forex traders can also use the RSI line to find exit points. Until the RSI is below the overbought area and moves higher, one can hold to their position.

To use price action strategies, a trader must know at least a couple of trading patterns. The most popular ones are the hammer, inverted hammer, shooting star, hanging man, and others. 

2: Range Trading Strategies

Range-bound trading is among the most popular trading strategies, especially for short-term traders who seek small but regular profits in calm market conditions. The idea behind this approach is clear and straightforward. Traders pinpoint a range where the price is canalized and then buy when it goes from the support to the resistance area and sell when the price goes in the opposite direction.

To use this strategy, beginners need only one skill to draw support and resistance levels. To make it simple, they need to see whether there are two horizontal lows and two horizontal highs at least. The price is likely to stay within a range for some time offering a lot of trading opportunities for both Forex and digital options traders.

Digital options traders buy Higher contracts when the price reverses at the support level and moves higher. Forex traders buy the asset in this case. The latter can use the resistance levels as a sort of target for the price movement expecting that the reversal will occur there again.

When it comes to the situation when the price reverses at the resistance level, traders can buy Lower contracts or sell the asset. In this case, the target can be set at the support level.

3: Breakout Strategies

Another simple but useful strategy is known as the breakout system. It requires minimum skills and caters to both beginner and professional traders. The idea behind this method is to wait for the price to break a support or resistance line and place a trade at this moment.

In this particular example, you can see that the price fluctuated above the support level for a while before plunging later. The moment when the breakout takes place a trader can buy a Lower contract or sell the asset. As you can see, the downtrend developed quickly once this happened as in most cases, breakouts result in momentum that can last for a while allowing traders to increase their potential profits.

Keep in mind that using breakouts requires you to know how to draw support and resistance levels only. However, to improve your trading results, you can also add some additional tools like technical indicators or price action.

To start using this strategy, you need to find the moment when the price breaks below the support level or moves above the resistance line. In this particular example, the price plunges below the support level, which allows a trader to buy a Lower contract or to sell the asset.

4: Trend-Following Trading Strategies

The trend is your friend is what every trader hears once they start their careers. Therefore, using market trends is one of the most popular strategies ever. However, a trader should be able to understand whether the price movement is solid or not. 

To use this strategy, you can add a simple moving average (SMA) with a period of 50, for instance, to smooth price fluctuations and eliminate market noise. The strategy is based on the concept of breaking the SMA50. In the example, you can see that the price breaks the moving average. 

The signal comes when the price tests the moving average before resuming the new trend. Traders can buy Higher contracts to purchase the asset. The strategy works in both directions, which means that in the case when the price breaks below this dynamic trendline, you can buy a Lower contract or sell the asset.

5: Position Trading Strategy

This strategy can be used by Forex traders only as they are not limited in time when it comes to closing their positions. Position trading requires you to buy or sell an asset and hold it for a long time. You can use any technical analysis tool to forecast future price fluctuations in this case. The idea is to hold on to a trade until a trend is over. 

Imagine that you have bought EUR/USD at 1.0800 expecting it to grow. In a couple of months, the price of the currency pair will be at 1.1020, which means that you can expect 220 pips of profit.

The negative of this strategy is that you will have to invest a lot of money in order to have substantial profits. If the price of one pip is $1, for instance, then you will earn $220 in a couple of months only.

6: Swing Trading Strategies

Swing trading is a very popular trading strategy that uses various types of trends to capitalize on larger price movements. To start using it, you need to pinpoint a trend first. You can use the trendline tool this time. Connect to higher lows or two lower highs. 

In this particular example, a signal comes when the price retests the ascending trendline. You can buy a Higher contract or buy the asset each time the correction ends and the price begins to move higher. For FX traders, this is an opportunity to accumulate several positions and maximize their profits on a single trend.

When it comes to exit points, Forex traders can wait until the price breaks the trendline and moves lower. This strategy works on both sides as well.

7: Carry Trade

Another simple strategy that caters to both beginner and experienced traders is known as carry trade. This method requires you to monitor the difference between interest rates and buy a currency with higher interest rates.

Carry trade is a long-term strategy that was designed for Forex traders. You can’t apply it for digital options due to their time-limited nature. Here is an example of how to use this approach. For instance, the ECB rate is 4.50% while the Fed rate is 5.50%. With this in mind, you can sell EUR/USD expecting the US dollar to benefit from this difference.

However, this strategy needs adjustments from time to time if any changes in monetary policies are expected. For instance, if the Fed is going to cut rates, EUR/USD is likely to start growing, which means that the selling strategy is no longer relevant and you should think about where to buy the currency pair. On the other hand, if the difference between interest rates is expected to grow (ECB has announced another round of rate cuts while the Fed will leave the rates unchanged) then you can stick to the selling strategy.

8: News Trading

One of the simplest yet risky strategies is suitable for all types of traders. The idea behind it is very simple as the only thing you need to do is to monitor any economic calendar for major events. Once you find out that an important release is approaching, you can buy a contract or buy/sell a currency pair.

For instance, you want to trade on the US yearly CPI data, which is expected to show a slowdown from 2.9% to 2.6%. You bet on the US inflation to slow down even more and reach 2.5%. With this in mind, you can choose EUR/USD and buy a Higher contract if you were right about your forecast or buy the currency pair when trading Forex CFDs. 

You can apply various methods when using this strategy. For instance, you can place a trade in advance, right on the eve of the data release. You can also open a position right after the results are announced. Some Forex traders buy and sell simultaneously and then close one trade and leave a profitable one. Others use limited orders outside the range that the price forms before the news release in order to catch the momentum.

9: Grid Trading

This is a very popular yet risky strategy with a lot of trades involved in a single session. As you may probably know, in some cases, the price may move in the opposite direction for some time before finally going in the direction of your forecast. In this situation, some traders open additional trades to increase their profits.

The system works the following way. Imagine that you have bought a EUR/USD Higher contract or simply bought EUR/USD at 1.0900. You used the price action system to find an entry point and there was a reversal signal hinting at the beginning of the uptrend.

However, the price went downwards for a while. You can both wait until it returns or engage again in order to maximize your profits. Let’s EUR/USD plunged to 1.0890. You can buy more Higher contracts there or add to your current CFD position. If everything goes according to your forecast, then when the price reaches 1.0900 again, your trades will be profitable already. When trading digital options, by creating such a grid, you will have more chances to succeed.

However, you should also keep in mind that this is a very risky strategy. Imagine that the price continues to move down and your forecasts were wrong. In this case, instead of maximizing your profits, you will increase your losses. Therefore, you should be very careful when applying this approach.

How to Find the Best Trading Strategy for Beginners?

There are a couple of recommendations for beginner traders on how to find the best trading strategy. They will help you to make sure that a particular strategy is the most suitable for you. Find them below:

• You should know the tools that are used in the strategy. Every strategy is based on some technical analysis tools that provide traders with exact signals for entering and exiting their positions. Before using one, you should be aware of how it works. For instance, if you are going to use any price action strategy, then you should understand the conditions under which each pattern appears;
• Test the strategy on the demo mode. To understand which trading strategy is best for you, you can use the demo mode that is offered to every Binolla trader. Simply try to catch several signals that you strategy provides and look what you can rely on. Once you have tested the strategy, you can switch to the real money mode.

FAQ

Which is the Best Trading Strategy for Beginners?

There are plenty of trading strategies that can be used by beginners and choosing one may be a complex task. The best trading strategy for beginners should be simple and straightforward and provide market participants with signals that will allow them to profit and gain money over time.

Which is the Simplest Trading Strategy that Novice Traders Can Use?

The easiest way to trade is to trade on news as this approach requires no previous knowledge. You should simply watch the current reading and compare it to the forecast to make a trading decision.

Is There a 100% Profitable Strategy for Trading?

No, there are no such strategies. Every strategy has its profitability percentage, which you should consider before using it. The idea of profitable trading is to use a good strategy and combine it with strict money and risk management rules.