A profitable forex strategy have to contain 2 things:
1: Besides what kind of conditions have to open position.
2: Besides what kind of conditions have to close position.
A good structured and applied forex strategy is a set of rules. Its point is that between the same circumstances the trader has to act also similarly. The set of rules provide self-confidence and discipline to the trader, because on the market he doesn’t have to improvise and make immediate, unthinking and fast solutions in any circumstances. There is a previously created forex strategy, with the help of this can avoid hard situations.
On the internet, many trading strategies can be found. Unfortunately, it can be said that a great part of these are made by amateurs and these are unsuitable to make profit. Only those forex strategies can be applied that really work. It is not enough to execute a strategy mechanically. It often occurs that a trader finds a forex strategy on the internet and begins to apply it without understanding the point of the given strategy. Important: that the trader knows exactly what and why does on the market.
Since there are a wide variety of profitable situations on the market, it is not enough to have only one trading strategy. A professional trader has at least 20-25 different trading strategies. In the different profitable market situations, always apply that forex strategy which is suitable to the given situation.
Elements of a forex strategy connect to each other like tiny mistletoe.
Build up Your Forex Strategy
To build up forex strategy pay attention to the next aspects:
Direction of market entry
The trader has to be able to recognise that sellers or buyer control the market. So, has to be able to determine the direction of the trend. Always the direction of the trend is the favored direction. You have to enter the market only towards the direction of the trend. Therefore, the first element of a forex strategy is the determination of the favored direction.
Besides favored direction, in every case market entry has to be strengthen by at least 2 signals which can be seen on the chart (so, it is not a signal that was given by an indicator). Such a signal can be: a trend line breaking, a support/resistance breaking, a rebound, a chart pattern or a candlestick pattern. A signal of an indicator never means an entry point. Entry point is set by the signals of the chart.
In trading the exit point is as important as the entry point. Before entering the market, stop loss and take profit levels have to be set. Besides these, the trader has to pay attention to the proper risk/reward ratio as well. You can read more about the theme on the menu of Risk Management.
A professional forex strategy has to contain which time frame you trade. Always the larger time frame gives the market direction. If, for example, you trade on 1 hour chart, then determine the favored direction on the 4 hour chart. When you want to use an indicator during applying a forex strategy, then before learn the operation of the given indicator carefully and only after that build it in your forex strategy.
Each forex strategy has also a psychological part, of which many investors often forget about. From a certain point of view a forex strategy is a recognition of trading opportunity and the exact execution of this. Thus, it is not enough to recognise a trading opportunity, but be capable to make profit from it. The trader can achieve it in the easiest way, that builds up or learns a forex strategy and keeps its every point. Usually, it occurs with beginner traders that they differ from their own strategies and immediately, recklessly or even nervously make decisions on the market. Those, who don’t keep the rules of their strategy, remain without fix point on the market, what is really dangerous. If the trader differ from his strategy, that is like he doesn’t even have a strategy. Each position opening and position closing has to be executed disciplined and relaxed. The proper mental condition maybe the most important part of every forex strategy.