How to Create a Forex Trading Strategy?submitted by alfafinancials5 to u/alfafinancials5 [link] [comments]
The word ‘Strategy’ itself is intimidating to novice traders as there are no foolproof techniques to create a flawless strategy. You might have a tight grip over the concepts of trading, but that doesn’t come in handy when creating a strategy. So, here are the basics to help you create a strategy.
Step 1: Identify the trader in you The first factor to consider before developing a trading strategy is the time frame in which you can trade. In Forex trading, you can trade at your convenience, but sticking to a routine will help you make an effective strategy. Day traders are those who can spend most of their time reading charts and numbers. They make over a dozen trades in a day. Swing traders hold on to a stock for a few days, and the time they spend is only to keep themselves up to date.
Step 2: Foresee the trend The better you know the trend, the better are your chances of profit. The trend is the way in which the market moves. Remember, you can make profits from both uptrend and downtrend. The moving average is one of the simple ways to identify the trend. There are a number of chart analysis indicators which can help you confirm the trend.
Step 3: Workout the risk A good trader is always calculative of his risks. Know how much you can spare for the trade and never dump everything you have in a single trade. Always be aware of what can happen when things don’t go your way. Your strategy should reflect on how much you can afford to lose in a trade and should get you out keeping your losses low.
Step 4: Determine your entry/exit points Your strategy should define when to enter a trade and when to exit. Some traders get out even with a marginal profit, while some tend to hold on to it longer. The charts can go either way, so know your entries & exits, and stick to your plan no matter what. Without calculating your entry & exit, it is easy to succumb to the disposition effect.
Step 5: Write it down and stick to it Once your well thought out strategy is ready, write it down and stick to it, at least for a considerable amount of time. Discipline plays an important role to not connect to your investments emotionally. A number of traders have lost a fortune stepping out of their strategy after giving in to emotions. There is no strategy to win your profits in every single trade, so feel the need to change & update your strategy according to the trend.
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Along with Forex trading tutorials and free trading courses, one of the best ways to learn how to trade the Forex market is by reading books from market experts. There are literally thousands of different books dedicated to the markets that range from beginner to advanced level. This Forex Trading PDF is written in such a way that even complete beginners can understand it and learn from it. In other words, we have read tons of Forex books, opened and closed thousands of trades; have filtered out 💦all the needed basics for beginner traders, and simplified them. Further reading on forex trading. For more information on getting started in forex trading, download our New To Forex trading guide, the perfect introduction to the world’s biggest financial market. Trading with real money is a different experience and you will encounter a different set of emotions, however; you do not need to lose a stack of money on a live account to workout if your strategy works or not. Once you know that your system or strategy works, then you can take the next step and begin trading on a live account. When day trading foreign exchange rates, your position size, or trade size in units, is more important than your entry and exit points.You can have the best forex strategy in the world, but if your trade size is too big or small, you'll either take on too much or too little risk. And risking too much can evaporate a trading account quickly. Your position size is determined by the number of ...
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