Hi, this is María today I want to share with you How to create a Successful Trading Strategy. Hope it will help you:

1. Reasoning of the trade: why buy? why sell? which pair?
Many traders enter a position because they are bored or just to feel excitement of being long or short. This is a recipe for disaster! You should always buy or sell a pair on a reason that makes sense to you.
For my experience I strongly believe that you should focus on some (not all) of the major pairs and don`t waste time with illiquid, choppy pairs.


2. Timing of the trade: Why now? Before economic news or after? Day or night?
You should also determine when you will trade and how often you will trade. Are you going to be a day trader or hold positions for a longer period of time.
It is important to define these basic ideas to begin to form some consistency and discipline.

3. Trading objective: what is the take profit target? what is the stop loss?
Try to place your tp and sl before entering the trade as you can always change that, if something important happens in the market in the meantime. Most trader tend to take their profits early while letting their losses run. This is because in the inexperienced traders mindset is very difficult to accept that he/she is wrong.
Placing your sl at the time you open a trade will help you create discipline and learn that sometimes you will be wrong.
If a trader makes 20-30% on their initial investment in the 1 year, that is outstanging.

4. Money management.
First you have to accept that nobody can have a 100% winning ratio & everybody (even the most experienced traders) are sometimes wrong. Then you must determine how much risk are you willing to take on each trade. Most experienced traders risk 1-4% of their account balance on each trade. This may look too low to the new forex traders, but will definitely help you avoid big losses, create the necessary discipline and keep you in the market in order to get the necessary experience. Also very important is to have a positive percentage of winning trades compared to losing trades, and a positive average profit compared to the average loss ratio. If your average loss is two times your average profit that means you need to make 10 profitable trades to cover 5 losing trades. Keep this in mind.

5. Documentation and analysis of the results.
Also with money management it is vital to keep track of your past trading and results in order to recognize past mistakes and avoid them in the future.


Best regards,
María
www.fx-megaforex.com
Trading Strategies in Forex (ebook)

Make better decision, make more money