If you want to actually make money in trading the forex market, you can simply look for the best forex broker who can provide you with helpful trading tips. Additionally, you can also try to find successful strategies formulated by more experienced traders and implement the in your trades. Although these things may be the easier methods, the most highly recommended thing to do would be to develop your very own strategy. This doesn’t mean that you should invent a totally original one, but instead, you can get some ideas from other developed strategies and tweak it according to your own style and preference.
Here are the things that you should consider when planning your own strategy:
- Time of Day and Chart Time Frame – One of the initial things that you need to decide on is the time of day to trade. You will figure out the answer to this based on your lifestyle goals and other factors. For instance, you should have a specific period of time for trading because you wouldn’t want your home life interrupt with your work life, or vice versa. The next thing to include in your plan is the chart time frame. You have to choose whether you are going to trade a short-term or a long-term chart.Longer time frames simply means that you will have to do less adjusting when it comes to your trade. For example, if you are trading a daily time frame, you should only look at your trading charts once a day.Daily charts can deliver high profits and require only minimal time involvement.
- Entry Criteria – Once you have already chosen a time frame for your trading, you should determine your entry criteria. All strategies must have certain criteria that should be met before entering a trade. Again, there are various criteria and filters that can be used.For example, it could be price action, the different technical indicators, fundamental analysis, a combination of support and resistance areas in trend pullbacks, and many others.
- Exit Criteria – After determining your entry criteria you should now figure out how to exit your trade. The simplest way to do this is through profits and stop losses. These trade exits can be found by looking at technical analysis, as well as profit or loss. Some forex traders use technical levels to place their stops and targets, while others base their targets and stops on the dollar amount or on risk vs reward. It is really all up to you to figure out how you want to do this.
- Risk Management – There a various methods that can help you calculate the risks. One of these methods is bots-based trading, which involves a trader taking the same lot size on every trade. The amount of money gained or lost in that particular trade changes based on the take profit and stop loss. Another popular risk management method is to use percent-based traits. Here, the trader will calculate his loss size, so if he’s trading at $1,000 account and he risks 1%, then his stop-loss would be set so that he’s only losing $10.
Obviously, there are a lot of decisions involved when planning a trading strategy. With this, you cannot simply follow the strategy of other traders without making it your own. Sure, you can always refer to strategies of professional traders, but you should be the one to determine the smaller details and adapt it to current market conditions.