One of the best Forex trading strategies for the beginner is range trading. The reason is that it is probably the easiest strategy to use. It is not just beginners who use this type of strategy, a lot of very successful professional traders also use it. While it is a fairly simple strategy there are a few things that you have to be careful of when you are range trading.
Range trading is probably the easiest strategy for the beginner to use when they start in Forex; fortunately it is also a very profitable strategy. It is based on the fact that the price of currency often stays within a certain range. Once you know what that range is it is easy to make decisions about when you should buy and sell. Determining the range that a currency trades in is a pretty simple task.
In order to be a successful range trader you are going to have to figure out the support and resistance levels for the currency you are interested in. The support level is the price that the currency won't go below and the resistance level is the price that it doesn't go above. Once you know what these are all you have to do is buy when the price hits the support level and sell when the price hits the resistance level.
Finding support and resistance levels requires a basic understanding of technical analysis and an ability to read charts. The good news is that these are probably the easiest things to identify on the charts so most beginners pick it up fairly quickly. Finding resistance and support level is based on trend lines, when you draw these on a price chart it will be pretty clear where the resistance and support levels are. Once you know that trading becomes very easy, but you do have to be careful.
If you are going to use a range trading strategy it is important to keep in mind that the price can and does break through the levels that you have established for resistance and support. What we are determining is the levels at which the price will have a hard time breaking through, if there is enough momentum it will however move through these levels. That means that you are going to have to pay attention to other things besides the trading range. In particular you will want to pay attention to things like changing interest rates; this can have a huge impact on the price and send it right through the support and resistance levels.
