Currency analyst

How to build your own trading strategy

Many people believe that markets are random, so they prefer to trade on a hunch entirely relying on their gut feelings. They might be right; sometimes it is possible to scoop a big profit moon walking down the Wall Street, but this approach is not free from risk.  Experienced traders rely on the thoroughly elaborated trading strategies. They know that although there might be some deviation in market prices, quotes do follow certain patterns. So, if there is a grain of rationality in market movements, it’s better to have a formulaic approach to forecast them. That’s why we encourage you to build your own trading strategy.

Most trading strategies include two basic elements: the setup and trigger.

Setup is a favorable market condition, a rather significant but not sufficient for the opening of the position. The setup may consist of one or more filters.  It may be a particular location of quotes, candlesticks or indicators that you apply to the technical chart.

Filters are designed to protect traders from receiving false trading signals, but be moderate in plotting them to your trading desk. If you apply many filters, you risk not to notice trading signals at all and miss favorable trading conditions.

The second important element is trigger. It is a technical signal that indicates the right moment for entering the market.

Once you define the setup and triggers you should:

  1. Ask yourself who you are: scalper, day trader, medium-term trader or long-term trader
  2. Choose a timeframe – monthly, weekly, daily, hourly and ext.
  3. Evaluate the size of your financial assets (because every strategy demands different amount of money)
  4. Define how much you would like to get from a certain deal (you should calculate the profit form a particular deal and choose time when you have to close your position)
  5. Be ready for primary financial losses (it’s almost impossible to build a profitable strategy without any sacrifices). Off course, you may master your techniques on demo-account. But sooner or later you will have to play in the real forex market.
  6. Decide which market condition, you’re looking take advantage of. As you know, there three primary conditions: trend, range and breakout. Each of these conditions exhibits its own market tone, so, you should decide in which sort of market conditions you’re more successful.

In this article, we defined primary steps that you should take to build your own strategy. In the next articles, we will deliver some profitable strategies introduced by financial gurus. 

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