There are several great trading strategies out there. Many traders become mesmerized by the "next great strategy" that they read on a website or view online. Beginning Forex traders will even spend money looking for an elite strategy. FXConnection wants you to know that building a strategy can be fun, easy and painless! This post will teach you how.
First, look for an entry signal to buy or sell the specific pair that you are making the technical strategy for. It is important that you tailor this strategy for the specific pair and time frame that you are trading because pairs respond differently. The entry signal to buy or sell could be an indicator or price action.
Second, develop money management rules. Risk management is essential for successful trading. Decide where you will place your stop losses and how much capital you will risk every trade.
Third, determine when you want to close a trade. You might have different rules in place for when to close a long trade and when to close a short trade.
Fourth, determine what type of market condition the strategy works well in. For example, Range-Trading Strategies perform poorly in volatile markets, while Trend-Trading Strategies perform poorly in ranging markets.
Fifth, conduct some back testing. Find out what the average winning and losing trade were. Remember that back testing is not always indicative of future performance.
Finally, remember this. It
is important to keep your strategy as simple as possible. You should be able to write out your trading strategy so that another trader could follow it without any problems. Happy Trading!
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