HFM information and reviews
HFM
96%
FXCC information and reviews
FXCC
92%
FxPro information and reviews
FxPro
89%
FBS information and reviews
FBS
88%
XM information and reviews
XM
86%
NordFX information and reviews
NordFX
86%

Why every trader needs a trading strategy


A trader without a trading strategy (TS) is like a driver with no map. Whatever your strategy is, it will help you deal with the chaos happening in the markets. This article will tell you what a trading strategy is and why you need to have it. You will find out why a well-thought-out trading strategy will help you make more stable profits and protect you from losing your deposit. But first things first.

The market lives in chaos

Let’s assume that you are quite familiar with a pair of indicators. You can recognize a number of candlestick patterns, and you can spot when some technical analysis figure is forming on the chart. Using this information, you will most likely succeed in trading, but how long will the luck stay on your side? After all, it is not enough to simply follow market reviews and trading recommendations, even if both are pretty accurate.

The market is unpredictable. Very often, even an experienced trader cannot understand what caused the market to rise or fall and where the price will go next.

Until you test your strategy in practice, you won’t get the desired result. Therefore, to make trading a stable source of income, it is crucial to apply a systematic approach.

What is a trading strategy?

A trading strategy is a set of rules that specifies a trader’s entry, exit points, and money management criteria for every trade. It takes into account all the nuances, and a trader has to follow all the steps strictly. It doesn’t matter how much time you allocate to stay in the market. Without a trading strategy, you won’t achieve any lasting success.

As we have already mentioned, a trading strategy describes the criteria to follow when opening a trade. And indicators, candlestick patterns and technical analysis figures will be of no use if you cannot apply them correctly in your trading.

If a trader enters the market every time he receives a signal from an indicator or sees a candlestick pattern on the chart, the result of the trade is likely to be disappointing. We are not saying that these signals don’t work, but you shouldn’t expect a stable positive outcome, especially if a trader uses leverage. It’s very easy to lose your cool when the market starts moving in the wrong direction, and it can all go to waste.

That’s exactly why a trader needs a clear trading strategy that answers the following questions:

These are the questions you should be guided by when choosing a trading strategy. And here’s another thing. Yes, you can find many examples of trading strategies on the Internet. But whichever strategy you choose, you need to adjust it for yourself. It will take some time to create/set up a strategy, but you have to do it.

In practice, you will see which indicators provide stronger signals, which ones give false signals, which chart pattern works best, and which trading session offers good entry points.

Key components of a trading strategy

So, you’ve decided to create a trading strategy. Let’s take a closer look at its main components. First, it must be rational. And it’s the main criteria. Second, you need to choose your trading instruments. It’s best to use any of the major currency pairs, as they work well with technical analysis and have good volatility. Take your time when making up your mind and selecting a currency pair as it will become your work tool. Third, we choose a timeframe and trading time (trading session). You can trade in the long term, medium term, or engage in day trading. Which approach to choose – is up to you and will depend on your personality: your temperament, psychological stability, tolerance to stress, etc. The size of your deposit and your financial goals play an important role too.

If you prefer long-term trading, opt for older time frames. For scalping, it is best to use smaller time intervals, such as M1 and M5, M15. Your choice of technical indicators will also depend on your trading style. For example, MACD and moving averages are good for long-term trading and RSI for scalping.

Fourth, we describe the entry criteria, i.e., what signal will be your cue to open a trade. Exit rules or the conditions when the trade needs to be closed also need to be specified at this stage. Do not forget to include your stop loss and take profit values.

The fifth step of creating a trading strategy covers trading volume. Calculate the volume based on your deposit. It will help you limit your risks. Account for potential drawdown too. To protect your deposit from draining, it’s worth thinking about the maximum number of open transactions you can afford at a time.

Did you know that you can earn extra money on trading volumes? AMarkets offers its clients a cashback program, i.e., it returns part of the spread from your transactions. The cashback rate depends on your trading volume. This is also worth considering. Once you’ve created your trading strategy, test it on a demo account first. Pay attention to how the price behaves on the chart. We recommend testing your strategy on different instruments and different time frames to get a more objective and complete assessment.

It is important to test how your strategy works during a drawdown as well. Wait for the maximum movement in the opposite direction in order to understand whether your deposit can withstand the drawdown. Remember that creating a trading strategy is a rather complicated and time-consuming process. Not every strategy works out right away. But don’t be discouraged. It’ll just take time to polish and adjust it. Start with simple strategies and work your way up to more complex ones. We are confident that in the end, you will succeed and create a profitable trading strategy that will suit you 100%.

Did you like this article? We regularly update our blog with new materials. We also recommend following us on Instagram and Facebook, where we post news about our current bonuses, promotions and market analytics. If you like our articles, follow us on Facebook and Instagram. Stay tuned for more interesting posts on our blog. We post new material several times a week.

#source


RELATED

Common Trading Mistakes and How to Avoid Them

Have you ever wondered what helped all those professionals of Wall Street become successful? You will be surprised, but the key to their reached heights is hidden in their mistakes...

How to place your first trade in Forex?

Forex is a unique financial platform. It gives traders an opportunity for both incredible profit and equally incredible loss. Thousands of people every day decide...

An Introduction to Technical Indicators

Technical indicators are calculations derived from price and volume data. They have plotted either as overlays on a price chart or below a price chart. Indicators...

Is Demo Trading Really Worth It?

There is an unfavorable outlook on demo trading merely for the fact that you can’t generate profit with virtual money. A lot of traders essentially...

What is the financial market?

By definition, the term financial market refers to any marketplace where financial products are traded. These include the stock market, bond market, foreign exchange market...

Trading Highly Liquid Currency Pairs: A Comprehensive Guide

Venture into the dynamic domain of trading fluid currency pairs. Dive deep into understanding the moments of rise and fall, uncover the forces that mold each currency...

How to Scale up a Small Trading Account in Forex?

Many aspiring Forex traders have one really important question: how to scale up a small trading account in Forex more successfully? This is an important question...

How to Get Started Day Trading Guide

Day trading is as simple as it sounds and can truly be anything you ultimately want it to be. Like anything, practice makes perfect and you get back out...

The Worst Mistakes to Avoid When Trading Forex

When someone tells you that trading Forex is easy and you can make tons of money with a few flicks of a finger, know that he is either a fool or a charlatan. Before...

How to become a Forex trader

While Forex is an exciting and lucrative financial market, many traders face difficulties when trying to make steady profits and grow...

Mastering Forex Trading: Time, Learning, and Success

Forex trading has emerged as a captivating endeavor, drawing individuals from diverse backgrounds into its dynamic and potentially profitable realm. For those considering entry into the world of forex trading...

Negative Balance Protection: What Is It And How Does It Work

Contract for Difference (CFD) trading is a popular form of investment, but as with any investment, it involves a degree of risk. Managing risk in trading is critical to protect your capital...

Forex Trading - The Actual Financial Solution

Forex trading has proven to be a steady source of income for many traders across the globe. The amazing statistics in 50+ Forex & Trading Industry Statistics...

The core concept of money management

Risk management, also known as money management, refers to a number of trading techniques employed to lessen risk exposure. Being affected by various factors...

What is Forex and how to trade on it?

The term Forex - also known as foreign currency trading, currency exchange or by its acronym FX - refers to Foreign Exchange or to transactions between currencies...

Frequently asked questions about Cryptocurrency CFDs

Bitcoin is a digital currency that was created in 2009. Its creators are unknown, as they disguised themselves using the alias of Satoshi Nakamoto. When Bitcoins are bought or sold...

What is a broker & what does it do?

The term "broker" is used in various spheres, such as in real estate, insurance, mortgage, etc. However, we mostly hear this word when talking about...

Can you be a successful forex trader?

Whatever we do in life, success is not guaranteed. The only thing that matters is our performance. The same may be said for trading in the Forex markets...

What Affects Forex Rates?

Currency exchange rates have always been a considerable factor used to determine a country's economic health and stability. This is typically defined as the rate at which one...

How to be a value investor

Value investing is an investment strategy that focuses on stocks that are underappreciated by investors and the market at large. The stocks that value investors seek typically look cheap compared...

Vantage information and reviews
Vantage
85%
FP Markets information and reviews
FP Markets
81%
IronFX information and reviews
IronFX
77%
T4Trade information and reviews
T4Trade
76%
Exness information and reviews
Exness
76%
Just2Trade information and reviews
Just2Trade
76%

© 2006-2025 Forex-Ratings.com

The usage of this website constitutes acceptance of the following legal information.
Any contracts of financial instruments offered to conclude bear high risks and may result in the full loss of the deposited funds. Prior to making transactions one should get acquainted with the risks to which they relate. All the information featured on the website (reviews, brokers' news, comments, analysis, quotes, forecasts or other information materials provided by Forex Ratings, as well as information provided by the partners), including graphical information about the forex companies, brokers and dealing desks, is intended solely for informational purposes, is not a means of advertising them, and doesn't imply direct instructions for investing. Forex Ratings shall not be liable for any loss, including unlimited loss of funds, which may arise directly or indirectly from the usage of this information. The editorial staff of the website does not bear any responsibility whatsoever for the content of the comments or reviews made by the site users about the forex companies. The entire responsibility for the contents rests with the commentators. Reprint of the materials is available only with the permission of the editorial staff.
We use cookies to improve your experience and to make your stay with us more comfortable. By using Forex-Ratings.com website you agree to the cookies policy.