It is said that in business if you fail to plan, you plan to fail. As cliche as it may sound, it is some solid advice for the ones who plan to be successful. Talk to any trader who earns money consistently. They’ll tell you that you could opt for two things: 1) diligently stick to a written plan or 2) fail. Visit MultiBank Group
You’re in the minority if you’re proceeding with a written trading or investment plan. It requires time, effort, and research to come up with an approach or methodology which brings success in the financial markets. Though nothing ever guarantees success, a major roadblock is out of the way when you have a detailed trading plan.
Here are some steps to follow when creating a winning Forex strategy:
Step 1: What kind of trader are you?
Why should you establish your trader personality profile? When you know what kind of trader you are, you’d be able to concentrate your time, energy, and attention in creating Forex trading strategies that are in sync with your trading style.
Step 2: What is your trading style?
When you know what kind of trader you are, you’ll be able to see where you are within the trading spectrum. Here are some types and categories:
- A trading timeframe preference: scalper, day trader, swing trader, position trader
- A type of trading analysis preference: technical trader, fundamental trader
- A risk tolerance preference: risk-averse, risk-neutral, risk-loving
Step 3: Which kind of analysis method will you use to make your trading decisions?
Certain types of analysis may suit your personality better. You might be a noise trader, a sentiment trader, an arbitrage trader, and a market timer, however the popular ones are technical traders and fundamental traders.
Technical traders work with technical analysis to assess an asset’s price movements with the help of its past prices to predict future price action.
They work with the help of trend analysis, support, and resistance analysis in addition to mathematical and technical indicators, Japanese candlestick analysis, market theory, and price pattern analysis to trade.
A fundamental Forex trader would largely work with news trading or currency carry trading strategies, which are generally based on interest rate changes that may have the highest impact on changing exchange rates.
Step 4: Which method will you follow to enter/exit the market?
On the Forex markets, traders typically depend on technical analysis in order to know when to enter or exit the market. They do this while monitoring the economic calendar to stay ahead of the news which could affect market volatility and lead to potential trading opportunities.
Step 5: Back and forward-test your system
When you’ve figured out the kind of Forex trader you are and which trading style would work best for your personality, you should try out your trading strategy with historical data (back-test) along with current market conditions as well as actual trading (forward-test).
It would be useful in ensuring that you’re more confident about the system you work with while also having a system that earns besides figuring out the profitable market condi