As we know, investment is an exciting opportunity to get short-term gains and long-term security. It is done only if you select the right strategy for trading.
Many traders do not become aware of the trading rules; that’s why they often face failure and leave trading.
So, it is important to know How to develop a foolproof forex trading strategy?
There are 6 main steps to develop your trade in a positive way. Among them, setting rules, time frame, risk management, and trend confirmation are most important. If your trading plan defines the right entry and exit points, your strategy is a foolproof trading strategy.
This post will learn clearly about all these 6 strategies specially designed for a successful trade.
You can follow these plans as they are not only easy but also profitable. Don’t forget to practice the free demo account set for beginners to become experts for real accounts.
Let’s have a deep look at this post to know as much as possible.
6 Main Steps to Develop Trading Strategy
A trader needs to set up his own strategies for the forex trading system along with Bank. You have to focus on them to design a successful trading system. You can become familiar with them very soon.
But it may take time to test these trading strategies…
So, be tolerant; a good trading plan can bring big wins.
There are 6 main steps to develop forex trading that are listed below in great detail:
Step 1: Time Frame
The first step you have to take is to decide the best time to create your system. Does it depend upon what type of trading strategy you chose?
Let me know!
Do you like day trading, scalping, or swing?
Do you like to look at charts daily, weekly, monthly, and yearly?
How long do you continue your positions?
All the above queries can be solved with the help of your trading time frame, even though you will also look at several time periods.
Step 2: Find Indicators for New Trend Identification
One of our main goals is to pick out trends as early as possible. To achieve this, we can use indicators.
The most popular indicators among them are Moving Averages that help the traders to identify trends.
Many traders use two moving averages like slow and fast; after using it, they have to wait for the fast average to come over the slow one.
This is the base of the “Moving Average Crossover” system.
It is the simplest way in which there are the fastest ways to spot new trends. It will prove a trouble-free method for you to trade properly.
Step 3: Find Trend Confirming Indicators
Another goal of this system is to get the facility to keep away our trades from Whipsaws. It means a trader never wants to be the victim of scam trading.
Whenever we find a new trending signal, we can use indicators to confirm these signals. It becomes easy for us with the help of specially designed indicators that validate new trends.
You can use some technical indicators to help you right the trend for trading, e.g., MACD and RSI.
Once you become familiar with these indicators, you will find the best one, and you can absorb them into your trading system.
Step 4: Specify Your Risk
When you are developing your trading system, it is important to define how much you expect to lose money on each trade.
No doubt, many traders do not like to talk about the losses in trades. But actually, a good trader always looks at both side’s trade profit and loss.
Your losing amount will be different from anyone else. So, you have to set your own trading categories and stick to them.
Just watch out your trading space but avoid too much risk on one trade.
Step 5: Define Entries & Exits
Once you can define your trading risks, you should take the next step to find where you will enter or exit trade to get more profit.
Entries: Many traders like to enter all of their indicators early to match up and start trading, but many others wait until the close of the candle.
It is just a trading style. Some traders are more hostile than others, and you finally decide what kind of trader you are.
Exits: There are different options for exits. The first is the trail of your stop. It means if the price moves by X amount in your favor, you have to move your stop at X amount.
Set a target is another way. A trader must exit when the price hits the target. The calculation of your target depends upon you.
For example, some traders select support and hostility levels as targets.
On the other hand, some traders choose the actual number of pips (fixed risk) on every trade. Be sure to stick to your target and never exit early.
Step 6: Write Down Your Trading Rules and Follow Them
The most important step to develop your trading system is to make a copy of the trading rules.
Please make a list of your trading system rules and stick to them.
Among the most important rules of a trader, discipline is at the top. Don’t forget to stick it to your trading system.
If you are not disciplined, your trades will not work for you properly.
Are you in the habit of forgetting to follow these rules? Don’t worry! We have a solution…
Just make a sticky note and paste it at the place where you sit for trade.
How to Test Your Trading Strategies
You must know about testing your trading strategies because it is important to know which plan will work and which may not.
Charting Software Package is the quickest way to check your trading plans. You can also go back to your plans in time.
Record your winnings and losses while trading, and be honest. There should also be a record of your average wins and average loss.
If you feel satisfied with these results, take a step towards the next step of testing: trading live on a demo account.
There is a need for a demo account. You have to practice on it for 2 to 3 months before starting a new trading system.
This will help you to trade according to the movement of the market. It is totally different from your backtesting.
After two months of using a demo account, you can select which trading system is suitable to stand in the market. If you find positive results, you can use that system in the real trading account.
At that point, you can continue your forex trading system without hesitation.
What is the secret of successful forex trading?
Forex trading strategies are never perfect because there will be no 100% prediction of time in the market. In this case, patience, backtesting, and setting stops are the secrets of the successful trading system.
What is the safest trading strategy?
The safest trading strategy is one that will help you to get reasonable returns without a huge loss. There are two main choices for this call and put options.
Which option strategy is most profitable?
The selling option is the most profitable strategy in the long term with low risk.
In the end, we will summarize with the statement that profitable strategy is very similar to war weapon in forex.
You may not have any superpower to solve all these problems. You have a choice to select any strategy you feel best.
Hopefully, this post will prove helpful for you as a trader. There is a need only to understand the above-mentioned strategies and choosing the best one.
Don’t forget to share it with your forex trader friend. Maybe in the future, we will bring more profitable trading plans for you.