The three core approaches
- Trend following — trade in the direction of the prevailing move
- Range trading — buy low and sell high within a sideways market
- Breakout trading — enter when price escapes a range
1. Trend following
Idea: markets that are trending tend to keep going more often than they reverse.
- Identify the trend: price above a rising 50-period moving average, with higher highs and higher lows.
- Entry: buy on a pullback towards the moving average or a previous support level.
- Stop-loss: below the most recent swing low.
- Exit: at a target of at least twice your risk, or trail the stop under new swing lows.
2. Range trading
Idea: when the market moves sideways, prices tend to bounce between support and resistance.
- Identify the range: at least two clear touches of support and of resistance.
- Entry: buy near support, sell near resistance.
- Stop-loss: just beyond the range boundary.
- Exit: near the opposite boundary.
3. Breakout trading
Idea: when price breaks out of a well-defined range, it can move quickly.
- Setup: a tight range, often before the London open or a major release.
- Entry: on a close beyond the range, or a pending stop order just outside it.
- Stop-loss: back inside the range.
- Risk: false breakouts are common — keep size small.
Which suits you?
| Strategy | Suits | Main challenge |
|---|---|---|
| Trend following | Patient traders, higher timeframes | Sitting through pullbacks |
| Range trading | Traders who like defined levels | Ranges eventually break |
| Breakout | Traders available at session opens | False breakouts |
Rules that apply to every strategy
- Risk no more than 1% per trade — see position sizing
- Know your risk-reward ratio before entering
- Record every trade in a journal
- Test on demo before using real money
Frequently asked questions
What is the easiest forex strategy for beginners?
Trend following on a higher timeframe (such as the 4-hour or daily chart) is often the easiest to understand and requires fewer decisions.
How long should I test a strategy?
At least 30–50 trades on demo, following the rules exactly, before judging it.
CFDs and spread bets are complex instruments and come with a high risk of losing money rapidly due to leverage. Most retail investor accounts lose money when trading these products. You should consider whether you understand how they work and whether you can afford to take the high risk of losing your money. Content is general information, not financial or tax advice.