There is no set standard developing a Forex trading strategy, Forex trading strategies are neither simple nor highly complex. However a successful trader needs to delineate their own Forex trading strategy so as to profit in the marketplace. The rule is straightforward, e.g. no Forex trading strategy, no Forex profits! There is no successful trader without a strong strategy. The strategy requires an investment in time, and there are various parts to a good, sound strategy. These are the primary issues why many traders lose money in the Forex market.
One critical point to a sound Forex trading strategy does focus on money management. Only fund your account with discretionary funds, .i.e. risk capital that you can afford to lose. Other than the initial investment, do not supplement your Forex investment account with funds from additional sources other than your Forex profits. Only let your account grows from the profits at all times. If you cannot build your capital account through the profits alone then you are not making enough profit or you are losing money.
Initially concentrate on just one currency pair until you get good at making profitable trades with it. Try buying and or selling calls or puts, but just focus with that one currency pairing. Once you have mastered how to consistently make profits with that one pairing, only then should you attempt to try adding a second currency pair to follow. Later even if you have mastered and added several currency pairs to your portfolio, do not overextend by attempting to trade all of them every day. Successfully trading one or two different currency pairs per trading day is more than adequate.
Another critical aspect to a sound Forex trading strategy is to focus on trades which you can comprehend. Initially this may seem logical, but you will be surprised how many Forex traders fail to follow this strategic principle. Only when you have total confidence in your decision making process, and you can defend the logic of your trade should you trade. If there is any hesitation or doubt within you, then do not execute the trade.
A final crucial aspect of your Forex trading strategy has to be to never add additional funds into a losing trade. The Forex market is extremely volatile, and nobody is always “in the money” with their assumptions about a currency pair’s price action. If you have traded incorrectly initially, don’t try to correct with a new trade that seeks to take advantage of the opposite movement from your initial trade. Realize that the market walloped you this time, take your loss, and move on. By using Forex binary option contracts, traders can protect their initial capital. These binary options can protect you against terrible loss when the market doesn’t go your way while still giving you considerable leveraging for profits.
In summary your primary reason for a Forex trading strategy is so that you do not trading on an emotional whim. As a trader you will not be successful if you let this volatility lead you. If you are in a losing trade, stick to your strategy and allow your stops to cut your losses. When you are in a winning trade, stick to your strategy and exit your position profitably without becoming greedy.
Finally, while trading develop your strategy by making observations on every single trade you execute. Write down what currency pair you selected, what was your trade, and what profit you desired, what the stops were, the date and time of entry and exit, and your results. Most important while still in your mind, note your trading reason or logic. Go back to your notes regularly, summarize, and learn constantly.