A winning forex strategy is what you require to become a pro in forex trading. If your strategy is poor, then you will most likely pull out of the trade with nothing but losses. You must have a concrete plan as to how you want to trade, before commencing forex trade. The following is a step by step plan on how you can develop an exchange strategy that will bring you wins always.
1. Skill Assessment
Before you commence trading foreign currencies in the market, assess yourself to determine whether you have the necessary skills to carry out the trade successfully. Ensure that you have put yours trading skills via a paper trading account so that you can be sure that your system will be efficient in a live trading circumstance. You can check out https://www.equiti.com/ for more on paper trading. Assess whether you can religiously use your signals without thinking twice about them. knowing that you have honed your skills and are a pro will enable you to make profits through your trades.
2. Mental Preparation
You must be ready to handle the forex trades both emotionally plus psychologically.Come ready and prepared to carry out the day’s trades. If you feel you are not ready or prepared to tackle the day’s trades, you are allowed to take a break of a day or so. Do not force yourself into the trade if you are not psychologically ready as you may lose your investment in the process.
Avoid any form of distractions. Try as much as possible to stay in an environment that is peaceful as this allows you to think right and make decisions that will ultimately bring you more earnings. Distractions are not welcome when it comes to forex trade since any minor distraction can cost you big time.
3. Establish Risk Level
Determine the amount you are okay losing in your portfolio. You will arrive at the risk amount based on your risk appetite plus trade approach. Your risk level should change and not be constant even as the market conditions change. The level of risk should lie between the values of 1% to 5% of your total portfolio in any given day you trade. Therefore, should you enter into a trade and lose an amount equal to the set risk level, then you should immediately leave the market and return to trade the following trade.
4. Set Goals
Prior to commencing any trade, you must establish realistic profit goals plus the risk-reward ratios. Establish the lowest level or risk-reward you are okay with before commencing the trade. Ensure that the reward level is greater than the risk level. Also, establish weekly, monthly, plus yearly profit targets either in percentage or dollar amounts, and carry out a regular assessment and re-evaluate to ensure that the targets are met.
5. Carryout Your Homework
Carry out worldwide market research to find out all that is happening before the marketplace opens. Find out whether there are any economic or earnings information that is yet to be released into the market. List the reports that are yet to be released on your wall and determine whether you should trade prior to the release or the report or afterward.
It is wise to hold back from trading until the report is out. That is because you are unsure of the impact the report is likely to have on the trade. Trading before the release of a pending report is just a gamble, and it is not good for forex trading as you will definitely lose.
6. Trade preparation
Indicate the major plus minor support and resistance points on the trading charts regardless of the trading structure or program you choose to utilize. Establish both the entry plus exit signals and ensure that they are visible or detectible.
7. Set exit rules
Prior to commencing your trades, determine your exit points. Two possible exist points exist in forex trade. The first exit point is where your stop loss is situated. You need to indicate it by writing it on paper and not record it mentally. The second exit point is where your profit target is.
8. Set entry rules
Determine when it should be okay for you to enter a trade. It should not be complicated.
9. Keep outstanding records
You should maintain records to know exactly what happened in a trade. If you have won a trade, you will be interested in knowing how it all happened. The same goes for a loss. You will want to know the mistakes you made so that you can avoid them in your future trades. Therefore, you will have a record of your targets, entry and exit points, support and resistance points, time, and so much more.
10. Analyze performance
When you have finalized your daily trades, you can add up your profits and losses and get explanations for the day’s performance. You can then record your analysis in your trade journal so that you can have it as a reference in the future.
Develop a concrete forex trading plan before entering any trade.