Without a strategy, you cannot shop properly from an ordinary market, let alone the Forex market. If you can build a proper strategy in Forex trading, you can assume that you will reach the pinnacle of success today or tomorrow. We are facing a common question from many beginners that ‘how to develop a strategy?’ Today’s article is to answer them.
Find your preferred trading style
First of all, you must decide what style you want to trade. There are different styles of trading. For example, day trading, scalping, swing trading, etc. To choose from the above styles, you need to know in what time frame you want to work.
If you want to initiate a position only for some seconds or minutes, you have to go for scalping. Scalping is best for those traders who do not want to trade all day and want to make a small profit risking a small loss.
But if you want to open a position in the morning and close it within the evening, you should choose day trading. It is best for those who want to make more profit by entering into short-term trends. Day and swing trading are the most popular ones.
Dealing with an advanced trading method
Many novice traders often prefer to swing trade the market. The word swing literally means wave. If the cradle is pushed and released, it will first rise a lot from the bottom, then come down, then go up again and come down again. In this way, he goes up once and goes down once in the same direction.
This goes on until someone stops him or pushes him again to swing again. This is exactly what happens in the Forex market most of the time. Sometimes it is seen that the price of the currency goes up to a certain level, then comes down again, then comes down to a certain level, and then the price starts going up again. Swing trading is for those who want to buy and sell in this swing.
Position trading is also very popular for those who want to open a position for a longer period. E.g., for six months or 1 year. If you want to trade for such a long-time position, this style is for you. Explore more details about the different trading styles and start working hard on that system.
Choose your broker
Another important step to success in Forex is choosing the right broker. However, in this case, the most important thing is safety. Therefore, you must have a list of trusted brokers. From there, you have to choose which brokers will give you leverage facility on easy terms. And lastly, keep in mind who cuts the spread less.
Selecting technical indicators
Your time frame has been set, and meanwhile, hopefully, you have got your broker too. So now you have to do a market analysis. For example, the fluctuation of the currency pair you will be working with, what is the continuing trend in the market, what is the trade volume in the market, etc.
So, there are several technical analysis tools or technical indicators available in the market to help you with this market analysis. You have to choose the tools based on the type of research you want to do.
Here are some of the most popular:
- SMAs or Simple Moving Averages.
- EMAs or Exponential Moving Averages.
- Bollinger Bands.
- OBV or On-balance Volume.
Select your Enter and Exit strategy
Before you join Forex, you need to set your strategy on when to enter and when to exit. In such a case, you can take the help of the chart to decide. It is up to you to decide how to exit if the market situation goes against you and how to enter if the market is in your favor. If the entry is not good, the chances of a good trade are very low. If the exit is not smart again, there will be a chance to shoulder the burden of loss.
Now you are ready to start trading. But every time you start trading, make sure that your stop-loss is set and that the risk-to-reward ratio is OK.
If it is OK, then you can enter the market with a cold head.
Finally, we would like to give some suggestions, set your own strategy, change the strategy according to your own experience. Do not follow anyone blindly. FX is nothing but developing a plan and a brilliant, unique strategy.