Thursday September 17, 2015 - 12:54:02 GMT
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Forex Trading Strategy - Its personal!
By John Benjamin at Orbex
Traders, new and experienced often find themselves going back to the drawing board every now and then in an effort to improvise or continue their search for the 'perfect trading strategy'. This trait often leads to traders either paying hundreds of dollars or even more in a bid to lay their hands on a forex trading strategy that can make them rich. It is no wonder then that for the most part, message boards, forums often are very active with many trading trying to either present their approach or traders looking to find the next best strategy. In the process, the only thing that remains constant is the fact while jumping from one strategy to another; the trader ends up losing his trading capital over the process. So how does a trader find or build their trading strategy?
Well, as the title suggests, a trading strategy is indeed personal and there is no one size fits all. It is no wonder then, that in most cases, traders who present a trading strategy that built around their personality find the strategy to be more profitable than someone who simply copies the trading strategy.
Understanding your personality
Are the emotional one? Do you often find yourself acting on impulse? Or are you the more patient kinds who can wait for days or weeks to wait for that perfect set up? Does it make sense for a trader who simply wants 10 or 20 pips a day from the market to trade on the daily or weekly charts?
As you can guess by now, it is important that a trader understands their personality before implementing a forex strategy that they come across. If all you want is to scalp 10 or 20 pips a day, you are better off searching for a short term, intraday strategy which trades on the smaller time frames than apply a longer term trend strategy, trading off the daily charts.
Likewise, a trader who has a full time job will find it difficult to implement a short term scalping strategy and regardless of how strictly the rules are followed, mistakes are bound to happen.
From the above examples, it is easy to understand that the mistake is not with the forex trading strategy but with the trader’s goals and their personality.
How to find the best forex trading strategy?
The first step is in identifying your strengths and weakness. If you can only spare a few hours a day, then trading off the daily or weekly charts is more ideal. This would also mean that the trader would have to be very patient and trade only when their trading system signals to a potential trading opportunity. Likewise, if you want to scalp the markets, make sure that you have the time and the instincts to be ready to trade as and when opportunities arise. For a scalper, it doesn’t make sense to trade a higher timeframe and likewise, for a part time trader, scalping strategy is out of the question.
Understand the principles of the forex strategy
When you come across a few forex trading strategies that suit your personality and one that you find more comfortable to trade, the next step is to ensure that you understand what each of the indicators in your trading system are referring to. In other words if you do not understand how moving averages work, or what it means when prices trade above or below a moving average, then it makes no sense to trade a system that involves moving averages. Taking some time to understand the forex trading strategy can be highly beneficial in the long term as it increases a trader’s confidence while trading.
Finding a forex strategy is often seen as an end, but the fact is that it is only the beginning. With due practice, understanding and more importantly finding the confidence trading a strategy requires a lot of patience and hard work. Traders need to understand that they cannot expect to see their equity grow by merely copying or adapting a forex trading strategy but that they need to make sure that the trading strategy they use makes them more comfortable in trading and thus allowing them to act accordingly.
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