Any successful forex trader will tell you that becoming successful isn’t down to hunches or lucky guesses but rather to planning, patience, and execution.
Just like any general needs to have a great strategy to win a war, so does a trader needs a strategy to make a profit.
You can get a trading strategy by:
- Copying the trading strategies of others
- Buying a trading strategy
- Developing your own
While many people will opt for the first two because they allow them to use the knowledge of others without much learning on their part. There are benefits of creating your own strategy such as:
- You learn more about trading
- You become a more flexible trader
- You become more confident
But what you may be asking is “how do I create my own trading strategy?”
No worries, we’ve got you covered.
Here’s what you need to consider when developing your own forex trading strategy:
- Time Frame
Similar to how a nutritionist would develop a diet plan based on your needs, you need to develop a forex trading strategy for you. One of the things to consider is the time frame for your trades. Questions you can ask yourself are:
What’s the average time frame for your positions?
Are your a day trader?
Or are you a long term investor?
Having an understanding of the time frames of your trades will help you to determine how your strategy will be structured.
Indicators are also vital when you’re designing your forex trading strategy. Why? Indicators help you to determine trends which are important for your decision making. But there aren’t just indicators for determining trends, there are also indicators which allow you to follow trends and those which confirm trends after your initial discovery. Familiarize yourself with indicators and use them to your advantage.
There’s a saying that with no risk, there is no reward. Traders are probably more familiar with this than anyone else because trading is inherently risky. That’s why when you’re designing your trading strategy, you need to determine how much of a risk you’re willing to take. That way you know how much you’re willing to lose and any losses won’t cripple you in the future.
After all that, test, test, test! One thing we recommend all forex traders to do is back test. This will help you learn from history and reduce your chances of making costly mistakes in the future. Testing is important to every trader and their forex trading strategy’s success.
Thanks for reading. If you want to share your forex trading strategy or how you design yours then do so in comments below!