subject: Developing A Winning Forex Trading Strategy [print this page] When it comes to trading forex online, there are many different strategies that can be profitable to traders. However it doesn't matter that kind of a trading strategy you follow because the truth is that if your strategy doesn't confirm to the main important points listed below then the probability of gaining success from such a strategy would be very low.
Making use of stop losses.
A lot has been said about this (using stop losses while trading). In order to use stop losses traders need to firstly accept that it is something that cannot be avoided. Most new traders do not make use of stop losses in their trading because most of the times the price returns to their initial entry. The general concept being that making use of stop losses only ends up creating more hassle that what is already is but in most instances when the market tends to go against you, there is a possibility that you are risking a lot more, especially if you are trading on leverage.
Looking at different time frames.
Most traders have their preferred timeframes when using charts. By sticking to a particular chart time frame, it helps forex traders to get a grip on the basics of trading and also gain insights into how the price movements occur. While mastering one time frame is recommended, traders should also monitor price movements in other time frames. This is especially useful to avoid and false trends that can be dangerous to your trades. For example, if you are a accustomed to trading on 15 minute charts, always keep an eye on the 1 hour charts as they tend to validate your trading decisions.
Keeping it simple
Trading forex, just like anything else should be kept simple enough to the point that when you have to make a trading decision it would be clear enough for you rather than complicating things by mixing a bunch of indicators. In trading, there is an often used term called confluence, which is making use of one indicator and/or a price action characteristics in order to validate a trading decision.
To illustrate, if you were to buy a pair and if it bounces over the upward rising trend line and also is bouncing off the support level besides creating a rejection candle.
Connect with your trading strategy
The success you get out of your trading strategy is only as good as how well you know it. In most cases, if you have managed to master a trading strategy, you should be able to get good enough trading signals out of it. However, you don't necessarily have to trade every signal that comes your way. Sticking to a nominal 2 - 3 trades based on such signals is considered to be ideal. Over trading in forex often results in creating more risks.
To conclude, forex trading strategies need to comply with the above mentioned points which are the most basic of aspects. Ensure that while trading, you focus on the risks in the trade involved rather than focusing on the profits you might get out of it. As they often say, it is better to cut your losses than to go on a wild hunting spree chasing profits which can be elusive at times.
by: Forex ECN
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