How to Create the Ideal Forex Trading Strategy
It is crucial to the success of any business that it is planned immaculately devised intelligently and executed properly. Any activity which is undertaken without a proper feasibility study and thorough planning is destined to collapse. A proper plan has two parts; what and how, namely what are you aiming at?
Set Your Objectives Right and Please Be Realistic
What objective you want to achieve from that particular business entity; and secondly how are you going to achieve those objectives? Likewise in Forex trading, until and unless you are very candid about your objective and a strategy, you are not likely to succeed or at least not up to your expectations.
As a good prelude to the formulation of your particular strategy; chalk out what you should not be doing; make a sincere effort to learn from the mistakes that other people have made. Top among them is the wild dream of earning millions overnight. Do not venture into Forex trade with your eyes closed and your mind engaged in building castles in the air. Forex trading is not a lottery or a horse race where you can ride your luck. The forex trade is a serious business which demands a long-term commitment, hard work, and realistic approach. Set yourself a practical and realizable objective. This stratagem has to be reinforced by conscientious and meticulous groundwork to remain aware of the financial and economic changes that may impinge on the currencies you are trading. Sound information, when pooled in with technical analysis can offer valuable indicators about the trend prices and exchange rates are likely to follow.
Everything Starts from the Right Mindset
The other important issue while devising a strategy and designing a plan of its implementation is to not let your perceptional lock, emotional barriers and rigid mindset get in the way of the execution of a sound strategy. It is easy to let your feeling sway you but is also the definite way of taking considerable losses. The very rationale of a strategy is to anticipate the eventualities and manage them in a way so as to diminish their adverse effects, if any, to the maximum. For instance, when you place a stop loss on a specific situation, you have reasonably determined that how much loss you can absorb on that specific deal. Trading discipline hence requires that if this limit is touched, you should close your position right away, irrespective of your sentiments and emotions.
The Ideal Forex Trading Strategy Should Have Entry, Take Profit and Stop Loss
For a strategy to be actually effective and sustainable, it should be capable of spotting entry, exit and stopping loss points for any trade. Ability to identify correctly these three structures is the basis of a sound trading strategy. Entry conditions may vary greatly. Some traders use indicators to signal possible trade cycle. Some adhere more to the fundamental channels like news releases about global affairs and their possible effect on any currency pair. Irrespective of what or how a trader receives signal for a trade setup, any trading strategy should have a fixed set of rules that clearly show when and where a signal is generated. No smart trader would ever leave the trade signals to guess work or emotion.
Once a trader has a system that clearly generates trade signals based on a number of fixed parameters, their system must also have clearly defined exit rules and stop-loss guidelines. Entry into a trade is simple, but reasons for exiting must also be based on a set number of rules. Sometimes new traders let their emotions take control and they exit trades sooner or later than they should. Therefore, having a trading system with obviously distinct exit conditions is essential. A sound trading strategy minimizes the requirement for any guesswork or emotions in locating, availing and exiting trades. The trading strategy must have a set of system rules to point out the point of entrance and exit of a trade opportunity.
Create Your Ideal Forex Trading Strategy by Modelling Successful Traders
While devising a strategy take some notes from the successful traders. Form an analytical research, try to find out what have they have done as compared to what path was followed by some major losers who were in the same position. You will see many traders have an outlook of ‘buy low and sell high’ concept. Though it can be true but it exclusively depends on presuming and guessing about the future currency and market trends. And to be honest no one can foretell future with any surety, so it is useless to formulate a plan which heavily depends on guess work. The decision of purchasing at support point and selling on resistance levels can prove wrong maybe 7 times out of 10. More than few factors play a dynamic role in market movements. It’s just not possible for any trader or to foretell the market trends.
Holy Grail does not Exist but the Ideal Forex Trading Strategy is for you to create
Therefore, many experienced traders don’t trouble themselves about future trends and future market probabilities. They rather try and pursue the trend up to the point it remains profitable to them. Their strategy is to ‘Buy High and Sell More High’, and this works. They do not have to worry why the market is coming up or why the market is coming down. They just catch a point when rates are moving up and enter the trade and come out of it the instant they see that they are making a bare minimum profit. A novice can also master this strategy with some practice and experience. It is an established modus operandi for making money in the forex trade. The Holy Grail of trading does not exist. There is no strategy that can handle all market conditions. But it’s certainly in your hands to craft out the Ideal Forex Trading Strategy that you are comfortable with.
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