Anatomy of a Winning Forex trading Strategy: Trading is the act of buying and selling financial positions such as Forex, but it is only a small part of what it takes to succeed as a trader. Anyone can register in a broker, open an account, find money and lose it by operating. Successful traders take a different route, a route in which to operate is pretty much the last thing they do. This entry describes step by step the anatomy of a winning strategy.
Fundamental Analysis – I Know that a lot of people who are attracted to Forex are strictly technical traders, but let me tell you something, the fundamentals are paramount. If You look at an action price graph, the action is directed by the fundamental underlying conditions of the market.
It Only makes sense to think that if you know what the conditions of the market you are in, you will be more able to read the graphics. If you are not aware of the economic news regularly, you should — they are a great source of trading opportunities and the beginning of any successful operation.
Technical Analysis: With This I mean the graphics, indicators, trend lines, support and resistance; Action price and how to read them. If There’s one thing I’ve learned over and over again is that the commonly accepted technical signals are ridiculously accurate. Why? Because They are generally accepted, many people use them, and they become one of those self-fulfilling prophecies.
The graphics say one thing, people do what they say and then it happens just that. Learn How to use technical analysis, and apply it to the fundamental and begin to recognize the most beneficial entry and exit points.
Strategy: Having A strategy is extremely important because it lays the foundation for success. A strategy is a systematic approach to solving a problem. The Oxford Dictionary defines strategy as «an action plan designed to achieve a goal.» The goal is to make money with Forex; The strategy is the plan to achieve it.
If things don’t go according to plan, you take a step back and find out that part of the plan doesn’t work, you fix it and put it to the test over and over again. A good strategy includes both fundamental and technical analysis, but also a specific set of rules on how and when to open or close positions. For example, some traders make the following assumption: In a bullish trend you only have to enter with a stochastic crossover in which the price bounces from a moving average. Consider the chart below.
Risk Management: Successful traders always know exactly how much they will invest in their next operation, without even thinking about it. This is because they follow a risk management that prevents them from falling into the dangers of investing too much in a single operation or even a series of losing streaks, which could leave them blank.
Some traders use a Percentage Rule. This means that they only risk a fixed percentage of their balance in any operation. This way, if the rule is 3%, the amount of money invested in each operation will grow as the account grows, but it is never too big for the account to be able to cope if the operation goes wrong.
Opens the Position: This part is simple if the first four conditions are fulfilled. You Will Have started with a solid base, you will have used it to do a good analysis, patiently waited for the correct signals of entry and inverted the appropriate amount, neither too much nor very little. At this point, all you have to do is enter your order, execute it and wait to see what happens.
Watch your position: Even with risk management and stop-loss, it’s a good idea to monitor what’s going on. You Might want to make a profit ahead of time if the news wasn’t what you expected or you might want to raise your profit objective if the stock price is OK.
Close the Position: The lesson I’ve learned repeatedly is that you don’t earn money until you close the operation. Even If it means closing a leaking operation, it’s better to save a little than to lose everything. In The same way, you may want to leave an open winning position, giving the benefits the opportunity to grow.
Repeat the above: If you’re doing well, you’ll see how your average profit exceeds the loss. Keep in mind that a winning strategy needs to be reviewed every so long, as there is no definitive trading strategy.