In forex, the major determinant of the profits you make is your trading strategy. A fully tested and well proven trading strategy gives you confidence as you enter trades and decide to leave them when necessary.
Now, the first part of your Forex trading strategy will be your trading plan. Your trading plan will be the cornerstone of any success or lack of achievement you will have in the currency market. A Forex trading strategy is important because it helps you build your confidence. You can also start to apply those strategies showing signs of promise. Next, you need to maximize your winning trades. Your Forex trading strategy must give you a clear set of rules you can follow.
Thousands of traders start off in an ad-hoc manner. They chop and change their strategy and never settle on any one forex strategy for any length of time. Instead, you want to build a sensible Forex strategy, enabling you to scale up your position sizing (eventually). To build a perfect forex trading strategy, a good use and understanding of trading tools on metatrader4 for instance sets you on a good tone.
When you download a metatrader 4, your rock solid Forex trading strategy will combine:
- Your entry criteria
- One or several exit strategies
- A robust risk management plan
- Daily trading journal and record keeping
- Ways to improve your psychology and mindset.
With those key components in place, you stand a much greater chance of success. You have heard the saying, “People don’t plan to fail, they just fail to plan.” What you need to do is make sure you’ve got a sensible, rock solid Forex trading strategy and build that into your trading plan. Without this framework, you will not be able to be a full-time Forex trader.
The major ways to build a rock solid forex strategy are:
- Using forex signals.
Firstly, find a Forex signal service which has a demonstrated historical track record of success and input the signals on your metatrader 4. Then, if all looks ok, start trading it with no leverage and with very small position sizing. The reason why this is ideal for new traders is because:
- You get to see a number of entry signals
- They will likely apply several exit strategies
- Overall, you will learn several methods of trading the forex market
Even if the Forex trading signal ends up losing pips and makes a loss, you will learn a lot of lessons from it. You may even decide to start up with a demo account on metatrader 4 for effective practice. Your number one goal is to get some ideas on what it takes to trade the Forex markets.
If you’re new to trading, applying a Forex trading strategy or signal service from someone with a demonstrated track record will give you lots of trading ideas. Potentially, this will fast track your trading education around the Forex markets. Your key goal here is to get ideas around entries and to get ideas around exit strategies.
- Ensure you don’t exit trades too early.
Remember, good trades take longer than you think to play out. Meaning, often a strong move will go much further than you think it can or will, the only factor that you don’t know is how long it will take to do so, and this is what trips most traders up. You need patience to hang on to winning trades and you also need to stop looking at them so much. Trust me, when I say that checking in on your trades too often is like the “kiss of death” for a trader, I mean it because I’ve experienced it myself more times than I care to remember.
Have an exit strategy for your trades when you enter them, or rather, before you enter them. This way you aren’t leaving the exit up to a last-minute emotional decision, which usually will be the wrong one.
- Excellent use of technical analysis:
Technical analysis involves the use of candlesticks variation to determine or predict a signal. There are a number of trading tools that help enhance your usage of technical analysis and they include:
- Daily Fibonacci Pivot Trade
Fibonacci Pivot Trades combine Fibonacci retracements and extensions with daily, weekly, monthly and even yearly pivots. The emphasis in the discussion here is on using these combinations with daily pivots only, but the idea can easily be extended to longer timeframes incorporating any combination of pivots.
- Bolly Band Bounce Trade
The Bolly Band Bounce Trade is perfect in a ranging market. Many traders use it in combination with confirming signals, to great effect. If Bollinger Bands appeal to you, this one is well worth a look.
- Forex Dual Stochastic Trade
The Dual Stochastic Trade users two stochastic – one slow and one fast – in combination to pick areas where price is trending but overextended in a short term retracement, and about to snap back into a continuation of the trend.