Many people believe that markets are random, so they prefer to trade with hunches that rely entirely on their gut feelings. Sometimes it is possible to make a big profit on a single trade inspired by your intuition. However, this kind of success was a matter of pure chance. There is no guarantee that you will be able to repeat it.

Experienced traders rely on a trading strategy that is thoroughly described. They know that although there may be some deviation in exchange rates, they are following a certain pattern. As a result, it is necessary to have a strategic approach to trading. That’s why we encourage you to build your own trading strategy.

Benefits of Having a Trading Strategy

  • Strategy is a set of rules. This helps a trader to avoid damaging emotions during trading, but only if the trader follows the strategy without deviations.
  • A strategy can be retested on historical data, so you will have proof that it really works.
  • Strategy reduces market analysis time. As soon as the strategy gives a signal, a trader starts acting.

Trading Tips : You can find various Forex Trading strategies on the Internet. Before using any of them on a live account, test them on a demo account. Have realistic expectations – some trading strategies are better than others, but none will offer you 100% profit.

So, despite the fact that there are hundreds of strategies available to use, you can try to build your own. Its undeniable advantage is that it takes into account your personal approach to Forex Trading at .

You don’t need to have multiyear trading experience to create your own strategy. However, you have to know the basics like:

  • How and when exchange rates move. For example, you should know that currencies can rise and fall due to central bank meetings and important economic data releases.
  • Where the profit opportunities are: what kind of economic event / technical arrangement will lead to specific moves in the market.
  • How to read Forex charts and use technical indicators.

Steps to Build Your Own Trading Strategy

1. Ask yourself who you are: brokers, day traders, medium term traders or long term traders and choose a timeframe – M30, hourly, daily, weekly, monthly, etc.

2. Determine the market conditions you will focus on. As you know, there are three main conditions: trend, range and breakout. Each of these conditions represents its own market tone. As a result, a strategy that is good for trend trading can show weak results when the market is in a range.

3. Choose your tool: will you use technical indicators and, if so, which ones? There are two types of strategies: indicators and non-indicators. If you prefer indicator strategy, the various technical indicators available on Metatrader will help you identify market movements. Indicatorless strategies can include analysis of candlestick patterns, chart patterns, trendlines and other elements of price action, as well as news trading.

4. Define the settings (required conditions) and triggers (entry rules) of your strategy.

Arrangements are favorable market conditions, significant but not sufficient for opening a trade. This may refer to a specific location of the candlestick or indicator that you apply to a technical chart.

The settings indicate favorable times for trading, but they do not point to exact times when you need to enter them. The setup can consist of one or several filters. Filters are designed to protect traders from receiving false trading signals. However, if you apply too many filters, you run the risk of completely losing the trading signal, so a balance between a small number and a large number of filters is necessary.

The second important element is triggers. Unlike the setup, these are technical signals that indicate the right time to enter the market. It is very important to know your specific trigger to enter the market without hesitation. They can be candlesticks, bar patterns, indicators and oscillators.

5. Set strict risk management parameters: risk / reward ratio, position size. The general ratio between potential loss and profit is 1: 3. The basic rules of trading are like this: the risk is not more than 1-2% of the deposit for 1 trade.

6. Select an exit rule – create a rule for Take Profit and Stop Loss orders.

There are not only entry triggers, but exit triggers as well. This is the moment when you understand that it is time to close your trade. Exit triggers are useful not only when you fail, but even if you have a profitable trade because the market won’t be on your side forever.

7. Write down the rules of your strategy. Even if you are sure that you remember all the steps of your strategy, it is important to write them down so that you do not hesitate when it is time to trade.

8. Test your strategy on the demo account. Make a good effort: this will create the foundation for your success. If something goes wrong, you’ll be able to fix it without losing money.

9. Start using your strategy on a live account: don’t deviate from your rules, but keep learning and thinking about how to make your strategy better.

By admin