At one point, you will have to start implementing your own strategies rather than relying on the ones already being used by thousands of other traders. A Forex trade is as good as the strategy backing it is; without a well-rounded plan, you can't expect to walk home with profits. The thing about strategizing that makes it so complex is that it has to be drafted keeping multiple considerations in mind. Timeframes, currencies, entries, exits, stops etc., many such factors exist that make planning a trade incredibly arduous.
Even when one of these aspects goes ignored, your strategy has a high chance of failing. With a detailed approach, you can gradually work your way towards developing a complete strategy.
Here are the elements to keep in mind while creating your own Forex trading strategies:
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| Tips to Develop Your Own Forex Trading Strategies |
1) Logic: Inarguably the most essential element to developing a Forex trading strategy is finding the logic behind it. Typically you can deduct this by answering the "What", "Why and "How" aspects.
What - what the strategy is about. As a Forex trader, you have your own set of interests, fear and expectations from an exchange. Take the existing strategies for an example; scalping, day trading, etc. These techniques all are devised keeping either timeframe in mind or the outcome. Strategies like scalping and day trading are short and are aimed at generating small profits but in a recurring manner. Similarly, longer trade plans are aimed at making a significant gain but taking things slower.
Why - why devise said strategy. You might want a thrilling experience so you'd choose a short-term plan, or if you want a big gain, you'd go medium or long. Find out why you want to implement your own approach.
How - how the strategy plays out. This is to put things together. You have to imagine the working of your Forex trading strategy to speculate if it goes the way you want it to. Right from the entry to the exit, the elements in place should be pre-thought of!
2) Currencies: Major, minor and exotic - as a Forex trader you get to choose from a variety of currencies. For any Forex trading strategies, picking the right currency matters! Predominantly because each currency has a period when it is profitable after which the value slowly drops. It is crucial that you keep this fluctuation of currency value in mind when you devise a method. The vast number of options may initially confuse you, but when the what, why and how are clear, you can pick the perfect pair to go with your strategy.
3) Timeframes: Short-term strategy won't work on periods longer than a day; long-term strategies are useless when applied within a day. There are various timeframes and time-zones in Forex trading markets for you to pay heed to before you can implement a strategy. A currency pair like USD-EUR might be more profitable during the American trading session than the Australian. Likewise, the currency pair you choose and the strategy you fit it into should align properly with the timeframe. To scalp with a volatile currency, you will have to pick a short-term chart because this is where most movements can be seen and big profits can be made!
4) Entry/Exit: Decide the points where you want to enter and exit a trade. Getting professional help from a good Forex broker will help you with this step. Without having a proper entry and exit, your strategy won't do you much good.
5) Stops/risk-management: Finally, implementing a good stop is important to ensure your approach pays off. Every efficient Forex trading strategy must have a stop order in place to keep the trade from tumbling down. Without a proper stop, there are high chances your trade will go out of control and bring in piling losses!
The first few trades made while Forex trading in Sri Lanka, will leave you mighty intimidated and excited all the same! Gradually as you get a hang of the volatility these markets carry, success will come by. Sign up with the ever-incredible Forex broker - WesternFX today, and master the art of foreign exchange. Equipped with the best of platforms to work on, you will perfect strategizing in no time! Call us today to know more.
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