Design Your Forex Trading System and Forex Trading Strategy
What is Forex Trading Strategy? How to Introduction to Forex Strategies? Steps To Create A Successful Forex Strategy And Right Time To Change Strategy.
What is Forex Strategy?
Forex strategy is the technique a forex trader uses to make a decision to buy or sell any currency pair at a given time.
Forex strategies can be based on technical analysis or fundamental analysis based on announcements and news. A trader's currency strategy usually consists of trading signals that trigger buy and sell decisions. Forex strategies can be accessible on the Internet or developed by the traders themselves.
Introduction to Forex Strategies
Forex strategies can use both manual and automated methods to generate trading signals. What is known as a manual system is a trader sitting at the computer looking for trading signals to make a trading decision.
Automated systems, on the other hand, emerge when a trader develops an algorithm that detects and finds trading signals and makes trading on its own. Algorithms can lead to better financial performance by removing human emotions from the equation.
Traders should be very careful when purchasing out-of-the-box forex strategies because it is very difficult to verify the past performance of these strategies, and most successful strategies are often hidden.
Building a Successful Forex Strategy
Most Forex traders start with a simple strategy. For example, they may find that a currency pair tends to break out of a particular support or resistance point. They can then add new elements to increase the accuracy of these trading signals over time. For example, they might add the requirement that the price change be supported by a certain percentage or amount of pips in order to trade.
An effective forex strategy has several components:
Market choice: Traders must decide which currency pairs they want to be experts in reading and trading.
Position size: Traders must determine the size of each trade in order to control the amount of risk taken with each trade.
Entry points: Traders must set up management rules about entering a long or short position on a particular currency pair.
Exit points: Traders should also develop rules that show them how and when to exit a long or short position. They should be clear about how much loss they are willing to do and at what point they cannot afford more.
Trading tactics: Traders must determine how to buy and sell currency pairs and which brokerage firms and technologies to work with.
Traders should consider developing trading systems that can make it easier for them to automate rule tracking in programs like MetaTrader. However, such practices also allow traders to run back tests to see how their strategy has performed in the past.
When Is The Right Time To Change Strategy?
A forex strategy works very well when traders follow the rules. However, a specific strategy may not work in all situations. Consequently, there is no rule that something that works today will yield good results tomorrow. If a strategy is not profitable and does not deliver the desired results, traders may consider the following before changing the game plan:
To match risk management to trading style: If the risk-to-return ratio is not appropriate, consider changing the strategy.
If market conditions evolve: Any trading strategy may be tied to certain market trends, so when those conditions change, the effect of that strategy can be nullified. In this case, you may need to make some changes in your strategy.
To understand: If a trader doesn't understand the strategy very well, it is quite likely that it will not work. If a problem occurs or the trader does not know the rules exactly, the strategy will lose its functionality.
While change can produce good results, it can often be costly. If you change your strategy too often, you will decrease your chances of winning.
CREATING A TRADING STRATEGY ON FOREX
Finding the Current Trend:
The current trend is determined by combining the bottom points and peak points in the graphic of the selected time period.
Determining Train Turning Points:
Corrective movements beginnings are determined. If there is a discrepancy in the direction of increase in the MACD Indicator in the four-hour period, a correction will occur on the daily chart.
Waiting for Correction Actions to Finish:
The inconsistency in the bearish direction seen on the MACD chart indicates the end of the correction movement.
Finding Confirming Signals with Other Indicator and Analysis Methods:
For example; In the Parabolic indicator, if the points cross above the prices, they are interpreted as "sell", and if the points are above the prices, they are interpreted as "buy" signals.
Positioning by Putting Stop Loss and Take Profit Orders:
Stop loss orders are usually placed 15 pips below the bottom of the price chart, and take profit orders are placed twice the range from the current price level to the stop loss level.