10 easy trading strategy for beginners (2024)

Trading in the financial markets can seem complicated and overwhelming for beginners. However, there are some relatively simple trading strategies that even novice traders can use to start generating profits. Here are the top 10 easy trading strategies for beginners:

1. Moving Averages (MA)

Moving averages are one of the most basic yet effective trading strategies. They calculate the average price of a security over a specified period of time and smooth out price fluctuations, making it easier to spot trends.

The accurate Moving Average (MA) is one of the easiest technical analysis tools to implement in Forex trading. For beginners, this is fundamental knowledge to grasp.

However, analyzing the MA is not without its challenges; misinterpretation can lead to trading losses. Therefore, you may choose to practice Forex trading with the MA line with the support of Forex Trade Bots. 👇👇👇

How Moving Averages Work

The two most common moving averages are the simple moving average (SMA) and the exponential moving average (EMA). The SMA calculates the average closing price over a set time period, while the EMA puts more weight on recent prices.

A moving average crossover trading strategy involves buying when a shorter-term MA crosses above a longer-term MA, and selling when it crosses below. The crossover indicates a potential trend change. For example, if the 50-day MA crosses above the 200-day MA, it's a buy signal as the short-term trend is now up.

Pros of Moving Averages

• Easy to understand and implement
• Effective at identifying new trends and momentum shifts
• Works on any time frame (e.g. 5min, hourly, daily)
• Many possibilities for tuning (e.g. fast vs slow MAs)

Cons of Moving Averages

• Can lag price action due to backward-looking nature
• Too many whipsaws and false signals in choppy/ranging markets
• Needs additional filters to improve accuracy

My Opinion on Moving Averages

Moving averages are the perfect beginner trading strategy in my opinion. They clearly visualize the trend and provide straightforward trade signals. I would recommend starting with the 20 and 50-day SMAs and then optimize from there once you gain more experience. Always use stops to manage risk.

2. Relative Strength Index (RSI)

The relative strength index (RSI) is a powerful momentum indicator that measures the magnitude of recent price changes to analyze overbought or oversold conditions.

How the RSI Works

The RSI oscillates between 0 and 100. A reading under 30 is considered oversold and above 70 is overbought. The basic RSI trading strategies are:

• Buy when the RSI drops below 30
• Sell when it rises above 70

Divergence between price and the RSI can also generate trade signals. For example, if the price is making new highs but the RSI is failing to reach new highs, it indicates bearish momentum divergence.

Pros of the RSI

• Very useful for identifying oversold and overbought levels
• Divergence spotting reveals shifts in momentum
• Works on multiple time frames and instruments

Cons of the RSI

• Can remain in overbought or oversold zones for long periods
• Many false signals when used alone without other indicators
• Divergence doesn't always lead to immediate reversals

My Opinion on the RSI

I think the RSI is an essential indicator in every trader's toolbox. It adds a momentum dimension that moving averages lack. I would use the RSI to confirm MA crossover signals. For example, only taking buy signals if the RSI is also below 30. The RSI is especially helpful on shorter time frames. Pay attention for divergence on larger time frames.

3. Simple Moving Average (SMA)

The simple moving average (SMA) is calculated by taking the arithmetic average of a security over a defined number of periods. It is one of the most basic technical analysis tools.

How the SMA Works

To calculate the SMA, you add up the closing prices over a time period and divide it by the number of data points. For example, a 50 period SMA adds up the last 50 closing prices and divides by 50.

Common SMA trading strategies involve buying when the price crosses above the SMA and selling when the price crosses below it. The SMA acts as dynamic support and resistance.

Pros of the SMA

• Easy to compute and widely used
• Smooth price action and filters out noise
• Identifies bias and support/resistance levels
• Customizable time periods (50, 100, 200 etc)

Cons of the SMA

• Lagging since it's backward looking
• May produce more whipsaw trades in choppy markets
• Multiple SMAs can generate conflicting signals

My Opinion on the SMA

The SMA is a must-know trading indicator. I would start with the 20, 50, and 200-day SMAs for determining the trend on daily charts. On lower time frames, I would stick to 20 and 50-period SMAs. Crossovers can provide reliable signals when used with other indicators like the RSI. The key is choosing appropriate SMA periods.

4. Support and Resistance Levels

Support and resistance levels mark areas on a chart where the price has reversed in the past. They indicate key levels where buyers and sellers tend to enter the market.

How Support and Resistance Works

Support occurs where demand is strong enough to stop the price falling further. Resistance happens where supply is strong enough to stop the price rising higher.

Common trading strategies with support/resistance include:

• Buying at or near identified support levels
• Selling at or near identified resistance levels
• Placing stop-losses below support and take-profits near resistance

Pros of Support and Resistance Trading

• Easy to identify key levels on the chart
• Provides clear areas for entries and exits
• Levels tend to work on all time frames
• Can use to determine stop-loss and take-profit

Cons of Support and Resistance Trading

• Subjective method, levels may differ for each trader
• Old levels may become obsolete over time
• Breakouts and breakdowns can be unpredictable

My Opinion on Support and Resistance

I think checking for key support and resistance levels should be part of every trading plan. These supply and demand areas often trigger big moves when the price breaks out. I would take trades at these levels in the direction of the overall trend using other indicators to confirm. Always have a game plan for when a level breaks.

5. Trendline Trading

Trendlines connect either highs or lows on a chart to determine the trend direction. Trading with trendlines involves buying and selling at the trendline.

How Trendline Trading Works

Uptrend lines connect rising bottoms, downtrend lines connect falling peaks. The basic rules are:

• Buy when the price bounces off an uptrend line
• Sell when the price breaks below the uptrend line
• Short sell when the price bounces off a downtrend line
• Buy when the price breaks above the downtrend line

Pros of Trendline Trading

• Clearly visualizes the trend direction
• Provides objective areas for trade entries and exits
• Can trade pullbacks within larger trends
• Useful on all time frames

Cons of Trendline Trading

• Subjective drawing of trendlines
• Requires breakouts which can fail
• Old trendlines become obsolete

My Opinion on Trendline Trading

I think trendline trading works best when used with other analysis like support/resistance. Look to take trades that align with the trend off trendlines and place stops above/below the trendline. Checking for ascending/descending channels using parallel trendlines also helps find extra trade opportunities.

6. Flags and Pennants

Flags and pennants are short-term continuation patterns that mark pauses within larger trends. They provide low-risk entry points to take advantage of the underlying trend resuming.

How Flags and Pennants Work

These patterns consist of a pole (sharp advance/decline) followed by a contracting consolidation range bound by parallel trendlines (flag/pennant).

Buying and selling strategies include:

• Buy the breakout above the upper trendline
• Place a stop-loss below the lower trendline
• Sell the breakdown below the lower trendline
• Place a stop-loss above the upper trendline

Pros of Trading Flags and Pennants

• Provide clear areas for entering and exiting trades
• Well-defined risk using the pattern height
• End the consolidation after price breakouts
• Can find them on any time frame

Cons of Trading Flags and Pennants

• Require breakout entries which don't always work
• Waiting for the pattern to play out requires patience
• Stop-losses are wider compared to other strategies

My Opinion on Flags and Pennants

I think flags and pennants are reliable patterns for trading pullbacks within larger trends. I would look for them as continuation signals in the direction of the previous trend. Use other indicators like volume to confirm the breakout. Entries can be fine-tuned using Fibonacci extensions.

7. Exponential Moving Average (EMA)

The exponential moving average (EMA) gives more weight to recent prices in its calculation, making it more responsive to price changes than the SMA.

How the EMA Works

The EMA calculation applies a percentage based weighting that drops off exponentially. The formula puts greater importance on recent data points.

A common EMA strategy involves buying when the shorter period EMA crosses above a longer period EMA, signaling an uptrend.

Pros of the EMA

• React quicker to recent price changes than the SMA
• Weighting mechanism makes it more sensitive
• Useful for analyzing trends and momentum
• Customizable time periods

Cons of the EMA

• Still uses past prices so can lag behind price
• Will produce more false crosses and whipsaws
• Not as commonly used as the SMA

My Opinion on the EMA

I think the EMA is a great alternative to the SMA for spotting new trends earlier. I would use a crossover system with the 20 and 50-day EMAs to catch momentum shifts. The EMA is also useful on lower time frames intraday. Focus on the direction of the shorter-term EMA. Use other confirming indicators.

8. Closing Price Breakouts

This strategy buys breakouts above recent highs or sells breakdowns below recent lows, capitalizing on continued momentum.

How Closing Price Breakouts Work

Traders identify price levels like swing highs or lows where previous rallies or sell-offs have stalled and reversed.

The breakout signals are:

• Buy close above resistance when it becomes new support
• Sell close below support turned new resistance

Closing price filters help avoid false breakouts. Stop-losses go above/below the breakout level.

Pros of Closing Price Breakouts

• Capitalize on momentum from trend continuations
• Clear trade entry triggers when levels break decisively
• Volatility expansion often follows true breakouts
• Can trade in the direction of larger trends

Cons of Closing Price Breakouts

• Breakouts are unpredictable and can fail
• Need other filters to avoid false breakout signals
• Difficult to tell if momentum will continue or reverse

My Opinion on Closing Price Breakouts

I think breakout strategies work well on stocks with strong uptrends or downtrends. I would combine breakout signals with high volume for extra confirmation. It's critical to plan the trade beforehand including where to enter and exit. Always use a stop-loss when trading breakouts.

9. Ichimoku Cloud

The Ichimoku Cloud uses multiple lines to clearly identify support, resistance, momentum, and trend direction. Buying and selling are based onprice relation to the cloud.

How the Ichimoku Cloud Works

The cloud is created by shifting the Senkou Span A and B lines forward. The key lines are:

• Tenkan (Conversion) and Kijun (Base) Lines: Shows momentum and potential reversals when they cross
• Senkou Span A and B: Creates the cloud for support/resistance

Common trading strategies include:

• Buy when price breaks above the cloud
• Sell when price drops below the cloud
• Use Senkou lines for support/resistance

Pros of the Ichimoku Cloud

• Cloud clearly highlights support and resistance
• Identifies momentum and trend strength
• Trading signals are easy to interpret
• Works well across different timeframes

Cons of the Ichimoku Cloud

• Indicator looks complicated with multiple lines
• Signals can be late developing at turning points
• Requires price to move beyond the cloud for trades

My Opinion on the Ichimoku Cloud

Overall, I think the Ichimoku Cloud provides a solid all-in-one indicator for determining the trend, momentum, and key levels. It works especially well for catching emerging trends on the daily and weekly charts. Just be careful not to anticipate signals. Wait for confirmation before entering trades based on the cloud.

10. Average Directional Movement Index (ADX)

The ADX measures the strength of a trend, helping traders avoid rangebound choppy markets and only trade alongside strong trends.

How the ADX Works

The ADX line fluctuates between 0 to 100. Readings below 25 indicate an absent or weak trend. Above 25 signals a trending market. When the ADX moves up, it signals strengthening momentum.

Popular strategies include:

• Only taking trend trades when ADX > 25
• Buy when +DI crosses above -DI and ADX is rising
• Sell when -DI crosses above +DI and ADX is rising

Pros of the ADX

• Confirms if the market is trending or not
• Easy visual filter to avoid choppy conditions
• Rising ADX shows increasing momentum
• Useful for long-term to short-term timeframes

Cons of the ADX

• Doesn't confirm trend direction
• Can remain elevated during a trend giving late exit signals
• Directional Movement lines (+DI/-DI) frequently cross

My Opinion on the ADX

I think the ADX is extremely helpful for timing entries and avoiding rangebound markets. I would use the 25 level on the daily chart to filter trades for the overall trend. Then on lower timeframes, only trade pullbacks when the ADX is above 25. Monitor the ADX line to understand when momentum is peaking.

FAQs

What are the advantages of trading strategies for beginners?

Some key advantages of beginner trading strategies include:

• Easy to understand and implement - Simple strategies are less complex and require less analysis.
• Defined entries and exits - Clear rules make it obvious when to buy and sell.
• Limited risk - Strategies like trendlines use stops to contain potential losses.
• Works on multiple markets - These strategies can be applied to stocks, forex, crypto etc.
• Helps develop good habits - Disciplined beginner strategies instill good practices.
• Builds confidence and psychology - Finding success early on motivates you to improve.

What timeframe works best for beginner trading strategies?

The best timeframes for beginners are the daily, 4-hour and 1-hour. Reasons include:

• Daily provides the overall trend perspective.
• 4-hour and 1-hour for tradable swings and pullbacks within the daily trend.
• Shorter timeframes take more experience to trade profitably.
• Higher timeframes have wider stops allowing safer position sizing.
• New traders should first master daily, then move to shorter timeframes.

What risks should beginner traders watch out for?

Some key trading risks beginners should be aware of:

• Overtrading - Trading too frequently causes excessive fees and mistakes.
• No stop-losses - Not using stops can lead to large losses on individual trades.
• Overleveraging - Using too much leverage magnifies losses when trades go wrong.
• FOMO - Jumping into trades out of fear of missing out often ends badly.
• Not planning trades - Lack of planning leads to poorly executed trades.
• Sitting on losses - Holding losing trades too long instead of cutting losses.
• Lack of risk management - Not actively managing risk creates problems.

How can beginner traders improve their skills?

Some tips for improving as a beginning trader:

• Keep studying - Read books, take courses to continue learning.
• Review losses - Analyze losing trades to understand where you went wrong.
• Refine strategy - Incrementally improve your trading edge over time.
• Track data - Keep a trading journal to review performance.
• Risk small - Limit position size while getting experience.
• Develop patience - Avoid forcing trades and overtrading.
• Seek mentorship - Find a reputable mentor to provide guidance.
• Simulate first - Practice strategies in a demo account before risking capital.

Is automated trading suitable for beginners?

Automated trading systems come with the following pros and cons for beginners:

Pros:

• Removes emotion - Auto trading acts without emotional bias.
• Hands free - Fully automated systems require less input.
• Follows rules - Algorithms execute the strategy flawlessly.

Cons:

• Still need experience - You must learn to code or use platforms.
• Monitoring required - Overseeing the system is still essential.
• Mechanical flaws - Automated systems can break down or malfunction.

Overall, simple auto trading methods can help beginners implement basic strategies consistently. However, experience is still needed to build, backtest, and manage the automated system properly. Most beginners are better off learning manual trading first.

Conclusion

Trading doesn't need to be complicated, especially when getting started. Using straightforward strategies that work across different markets represents the best approach for beginners. The key is mastering the basics, managing risk, and gaining experience before moving to more advanced techniques. Patience and discipline are vital. Beginners should avoid shortcuts and focus on developing solid trading habits based on high probability strategies. The strategies covered in this article provide an ideal starting point for achieving consistent profits.

See more: