Having Trouble Build A Winning Trading Strategy

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How To Build A Winning Trading Strategy

Having Trouble Build A Winning Trading Strategy

This forex blog from forex friend loan will walk you through about how to build a winning trading strategy that the key components and benefits of a forex particular trading strategy.

When starting to trade Forex, the trader must build first his own forex trading strategy. This is important especially for beginner traders. The forex trading strategy is considered like a plan that identifies how the trading will go. This includes identifying the analytical ways the trader will use to know the currency pair trend. It also identifies how the money in the trading account will be managed. Here are considered general steps to build your forex trading strategy.


A Forex Trading strategy, if properly developed and followed will allow you to survive and make progress in the forex market. Without a strategy, you will be at the mercy of the next exciting story or be chasing a breakout (which can turn out to be a trap.)

One of the best analogies I heard to trading was to imagine yourself as a hunter who lived in a secluded cabin in the woods.

The hunter knew they would only be able to eat what they killed and that many of the animals were dangerous, so they needed to plan their attack with precision. The precise plan involved them only exiting their cabin when they a wounded animal passed nearby so they could leave the cabin, kill their prey, and take it back for food without too much risk on their part.

The connection of the hunter in the woods to trading is necessary. You should always be looking for the best set-ups, which are never guaranteed to produce a profit but are opportunities with controlled risk. Continuing with the analogy, a trader without a trading strategy is like a hunter without a cabin, always exposed to attack and likely trying to hunt animals that outmatch him and thereby present a negatively skewed risk.

Having trouble build a winning trading strategy? So how do you build a winning trading strategy that keeps your risk minimal while allowing you to trade the forex market?

You need to identify a handful of key trading aspects that suit your skill-set best. Let us see first what makes the forex trading system a successful one. It must have three main features:

1. It must be simple: when building the forex trading strategy, be sure to make it simple. A complicated analysis will confuse you and lead you to fail. The number of technical tools you use to identify the trend must be two or three at most.

2. It must go up the profits and cut the losses: when you see a trend and use the forex trading system you built, it must continue opening the deal if the profits going high and close the deal if the losses going on.

3. It can follow long-term trends: long-term trends earn more money to make the forex trading system follow long-term trends.

My 5 Steps To Build A Forex Trading Strategy

1. Your Method
This means the rules you use to identify the trend and the how the money is managed in the forex account. As stated above, it must be simple to ease the usage of it.

Identify your analytical techniques: in forex trading, currency pair trend prediction is the key to be successful in forex. If you are well able to predict where the currency pair will go in the future, you will be able to earn money.

There are two basic ways to use: fundamental analysis and technical analysis. Fundamental analysis means to track economic news of the countries that own the currency you are trading and use the news you are reading or hearing to measure the economy of that country. This way is suited for long-term trades or trades that use large time intervals such as weeks or months.

On the other hand, technical analysis uses the charts directly to predict the trend of the currency pair you are trading. Every forex trading chart supplies you with huge tools that allow you to read the chart more intelligently. These tools can be studied in any forex contexts but the most common are the moving averages, the pivot point analysis, the MACD, the stochastic indicator, and the RSI indicator.

In an analytical analysis, you just identify two or three tools from the tools mentioned above and add them to the chart. This will allow you to study the chart and know the currency pair trend. When choosing the analytical tools, you must not use too many tools because this will make the analysis complicated. Only two or three tools are sufficient.

Second, the analytical methods which will be used during forex trading must be planned carefully. This step is considered the most important one in the forex trading strategy.  It can be fundamental or technical schemes. The technical analysis depends on analyzing the curve of the currency pair price which will be traded. It uses technical schemes in order to predict the price movement in the future based on the history of the price. The most popular schemes are simple moving average, exponential moving average, stochastic, Relative Strength Index, MACD, and pivot point trading. The fundamental analysis depends on economic news analysis


2. Use Breakout In Your Strategy
The term breakout is used to mean that the price is reached a level that the price can go beyond it for a long time. If breakout occurred, then there is a long probability that it will continue largely in that direction. The forex trading system that you build using that fact can do well.

3. Identify The Time Entry
an entry point is a price you enter a deal at it or the price at which you buy or sell. When building a forex trading system, one of the basic factors to consider is when to enter a trade and when to exit a trade. If we use the breakout condition in our system, we can identify the entry point as the breakout point. To confirm, we can wait until the high stochastic crosses the low stochastic.

4. Identify When To Exit
You must also define the exit point in your forex trading system. If you use breakout on your system and entered a trade, you can monitor if the price goes above the breakout point. If it does it will turn into profits. If it goes below don’t exist below the breakout level at the same time. You can wait for one day and exit if it reaches after one day assuming you are working with the weekly chart.

5. Money Management
This topic is one of the most important things to consider when building the forex trading system. What is meant by money management is to know the percentage of your money to enter a trade with, the percentage of risk and the number of profits to take. This can differ according to the account size.

The following weeks will break each of these strategy components down so you will know how to develop a style custom suited to you. Just like a set of golf clubs that aren’t fit your body-style can wreak havoc on your golf game, trying to fit someone else’s plan that has shown success because it was suitable to their skill-set could produce horrible results for you.  If you’re brand new to trading and currently are working on a demo account, this will still be a great benefit to your trading.

Know that you know the components of a trading plan that are needed; here is a breakdown of the benefits. First, with a well-thought-out trading plan, you will be able to monitor your open trades with ease according to your trading plan. Secondly, a trading plan can introduce consistency that can help you turn your trading into a business. Lastly, a trading plan will help you qualify current market opportunities as well as knowing which opportunities are NOT worth trading.

I’d like to leave you with a quote from one of the best books on trading psychology in the market, Trading In The Zone, by Market Douglas.

“If there is such a thing as a secret to the nature of trading, this is it: At the very core of one’s ability
1) to trade without fear or overconfidence,
2) perceive what the market is offering from its perspective,
3) stay completely focused on the “now moment opportunity flow,” and
4) spontaneously enter the “zone,” it is a strong virtually unshakeable belief in an uncertain outcome with an edge in your favor.

The best traders have evolved to the point where they believe, without a shred of doubt or internal conflict that “anything can happen.”

How To Build A Winning Trading Strategy