Some would say scalping, while others might choose breakout or even hedging. Let's find out why those 3 are the top forex strategies for micro account.
Beginners often ask a common question: what are the best forex strategies for micro accounts? It goes without saying that forex trading strategies are based on a few fundamental ideas applicable to any market. These concepts include looking at charts, reading indicators, or technical analysis. Trying to figure out what strategy is best for you can be overwhelming. You've got so many choices: Bollinger bands, Fibonacci retracements, candlesticks, and more. Do you have the time to learn all of that? Should you use one strategy exclusively and ignore others?
The truth is that it doesn't matter what strategy you use as long as it's logical and based on historical data. The best forex strategies for micro accounts are the ones that make sense and help you identify price patterns in the market quickly.
We're going to talk about three strategies that are simple and effective. They require little time to learn and will help you get started building your knowledge of forex trading right away.
Scalping is by far the most straightforward strategy to master. Because you're trading with small amounts, a small move up or down in the market can have a significant impact on your account balance. Though it's easier than other strategies, it requires a lot of steel's attention and nerves since you'll be placing trades every few minutes. Start small and work your way up as you gain confidence in making money consistently with this strategy.
To have a successful scalping, you are required to pay close attention to price action and make decisions quickly. If you're watching the news and see that there's been an event that could impact currency prices, jump into position immediately so that if they do move, you're in while everyone else is still deciding what to do. This strategy also requires good risk management so that you don't get stopped out of your trade before the price has a chance to move in your favor.
2. Trading Breakouts
A breakout strategy is a widespread approach to trading. It's trendy and proven to be highly effective. Many micro account holders use candlestick patterns on a daily chart and trade breakouts from these patterns with tight stop losses. Candlestick patterns are recognized by their unique formations that reflect price movement over time.
Picking the right currency pair is crucial when it comes to trading breakouts. It takes time, experience, and practice to develop the ability to choose the right pair. You should start with one or two pairs that you're familiar with and then gradually expand your trading portfolio over time.
This type of trading is so effective because it allows traders to take advantage of price momentum. When a particular currency breaks through a specific resistance or support level, it instantly attracts the attention of many traders who wish to capitalize on this price move. A breakout strategy takes advantage of this increased demand for a particular currency. It attempts to ride that wave as long as possible before taking a profit at the first sign of a reversal.
Forex hedging is the process of protecting against unwanted price fluctuations in the foreign exchange market. You can use hedging strategies to limit losses or lock in profits on short-term currency movements. Hedging strategies can reduce risk and exposure to market fluctuations, but they can also increase profits if properly executed.
The most common strategy is a "buy/sell" order. You simultaneously buy and sell an identical amount of currency at two different rates. One of these trades locks in profit, while the other reduces risk exposure.
Another common hedging strategy is a "buy/sell" order based upon the same principle as above but using multiple transactions to maximize potential gains or minimize potential losses.
All of the above strategies will help you start as a newbie in this trading field. It is effortless to become a profitable trader by always considering the most critical aspect in all financial markets. This crucial aspect is, "the trend is your friend until it ends". As long as you are always aware of the state of the market and can predict when the trending ends, you can catch that best time and place to get out of your position.
Last but not least is "diversify". By diversifying your portfolio, you are hindering any losses, although it will never give you a 100% chance of winning. Once you try all these tips, you will achieve your maximum potential in forex trading.
Running trades on a micro account does not only requires the right strategy but also needs to think about the leverage that matches your small balance.