Forex tips and tricks
How to Set Up a Profitable Forex Trading Strategy
The forex market is not a casino for gamblers and forex trading is not a get-rich-quick scheme. It is a business venture where the businessperson has to have a plan on how to safeguard his/her capital investment and make wise trade decisions to make capital gains or profits. This plan is commonly referred to as a forex strategy and every successful trader has one. Any trader who does not have a strategy is a gambler dependent on luck, and is doomed to fail.
Every forex trader is a unique human being with unique reasoning capabilities and different schedules to keep. That means when it comes to trading strategies, there is no “one size fits all”. Each trader needs a strategy that will work for them, and hence, one needs to define and implement their own customized strategy early in their forex trading career.
Write It Down
The most important thing for one to learn as a forex trader is to journalize everything. In the process of customizing a strategy that will work for you, trade on a demo account. Write down all the trades you make. Most important, write down your thought process from the time you start viewing price charts, to analyzing signals and the market, to determining trade entry and exit point, and even what you were thinking as you used various tools to manage your open positions. Analyzing your thought processes will later reveal to you what works for you and what doesn’t.
Choose Your Currency
Each and every currency in the world reacts differently to market forces. These different reactions get even more complicated to analyze when doing a comparison of one currency against another. Therefore, it is very important for a trader, especially one new to the forex market, to choose just two currencies to trade on. These two chosen currencies make a currency pair. It is more prudent to choose one of the currency pair majors since they exhibit more liquidity, volatility, and availability.
Record Your Actions
Apart from writing down your thought processes and recording the reasons why you opted to make a particular trade and declined to take another, you need to also record the actual trade actions that you make. This means you should chart all your executable steps and include records of timing for each step. This will allow you to later repeat profitable actions and avoid repeating loss-making actions. This will also help you in identifying currency price patterns.
Instruct Your Software
Through following the previous steps, you will in time have a pretty good idea of what works for you, under what conditions, and during what times. You will need to put some coding in your trading platform or give your forex broker some instructions to follow for each trade. If you opt to automate your trades, you will need to input even more detailed coding into your forex robot to ensure smooth running and high profitability.
Test Your Strategy
As you work on each step above, continuously test your strategy. It is best to use your final strategy for at least 3 months on a demo account before you implement it on a live account. This will ensure that you have taken care of any kinks without exposing your account to unnecessary risks.