Build Your Forex Strategy the Right Way
In order to start trading Forex successfully you will need to build a strategy that is so complete you donít have to think too much when trading live. There is no point sitting there second guessing yourself and trying to make a decision when you are in a trade. You should already know how you are going to react to every possible scenario because you had spent the time considering them. This may sound like a tall order but once you are done with all of the lessons in this section you will see that it really isnít.
Think about it; your only options are to buy or sell, the market can only move up or down, and the market will trend upwards, trend downwards, or consolidate in a range. When the market does change direction there are only so many ways that it can present itself. Itís actually all very logical and the hardest thing for any Forex trader to master ends up being the psychology of it all.
A Series of Strategies Create a Complete Plan
A complete Forex trading plan is made up of a series of strategies. You can break down the actions of trading in to the important pieces, trade location, entry trigger, and trade management. Each of those pieces will need its own strategies that are able to provide answers to all of the questions below.
Here is a list of the bare essentials that you would need to consider to take a any trade intelligently.
What needs to happen for you to enter a trade?
Why would you consider buying or selling in a particular price area?
What would be sufficient evidence that you are not alone?
When will you pull the trigger?
How you will handle the risk:reward element?
Where will you put your stop loss and why?
What will your take profit be and why?
What is the minimum risk:reward ratio you will accept?
How will you manage the actual trade once you are in?
When will you move your stop loss to break even?
Are there any situations that may warrant moving to break even sooner?
Will you use a trailing stop and how?
What will your lot size and account management be like?
What percentage of your account will you risk on each trade?
Will you consider some trades more probable than others and risk more?
Will you consider some trades less likely than others and risk less?
All of the above questions can be answered with a handful of price action based Forex trading strategies. It is all of those strategies that combine to make you a complete trading plan. This plan will enable you to successfully trade several types of trade and also give you a blueprint for adding more later on if you need them.
This series of lessons will show you Forex trading strategies that answer all of the above questions and show you several types of trade to expand on it all even further.