Forex Trading: Creating a strategy

One common mistake for those who are entering the world of forex is to start trading without a strategy. Because of the attractive features of this market, most new traders are starting too eager to test themselves. This approach is dangerous because they often believe they can operate earning right away, sometimes they also think that they can make a fortune in a short time, but pretty soon they get tired and end up having the wrong approach that leads them to a path of repeated losses.

The first step to operate profitably is to create a strategy or trading plan. Creating a trading strategy is of crucial importance and is also quite easy. To proceed with the creation of a strategy, traders should consider the following:

Before opening an operation there must be a good reason. Very often traders open operations out of boredom or to feel involved, but with these reasons you go straight to the disaster. The reason to buy or sell a currency pair has to make sense, does not matter if it is based on fundamental analysis or other techniques, the important thing is to have a reason.

The choice of the currency pair to trade can seem simple but in reality it is not. Experienced traders always suggest to focus on some of the main cross (EUR / USD, GBP / USD, USD / JPY).

Define the timing, especially when placing the operation and how often to perform trading operations. From here you establish if you are day trader, or if you prefer to hold positions for longer periods of time. You must consider whether to open positions before or after important economic news, if during the night, the opening of different markets etc.

Define the objectives, the ultimate goal of trading. What are our objectives of take profit and stop loss. It is important to try to place your take profit and stop loss before entering the market, since they can always be changed later if the market changes. Most traders tend to close the transaction quickly, in case of profit, while allowing continued operation in case of loss.

Placing a stop loss at the beginning of the operation will be easier to have a reference point, and it will allow to have more discipline. In addition, many beginners tend to have very unrealistic goals. You can have high returns during the first year of investment, but it is not easy to achieve. With these unrealistic expectations, many traders do withdraw, even before they had time to learn the behavior of the market.

For the first year, the draw is a good target. In fact, the majority of traders do not get to draw and those who make 20% or 30% on their initial investment can be counted on fingertips.

Money management is the main aspect of trading. First you have to accept the fact that no one can have 100% of transactions closed in positive, and that everyone, even the experts can make mistakes. The key point is to accept the fact of being wrong, before the mistakes can affect your money. To do this you must specify the amount to invest, after which what you are willing to risk on each transaction.

The more experienced traders risk 1% to 4% of what they have on the trading account. Although to the new traders may seem too low, this will help avoid big losses and create the necessary discipline that, by continuing to operate in the market, will help to enhance the experience. It is very important to have a higher percentage of transaction and a positive average profit higher than average losses. If the average loss is twice the average winnings then the traders would be forced to close 10 transactions in positive, to cover 5 negative.

Add Your Picture

About the Author

Article Written By: WolfingerStain

Rating: 5.0


No comments posted.

Add Comment

You do not have permission to comment. If you log in, you may be able to comment.

You Can Link Directly to "Forex Trading: Creating a strategy" by using the url:

This Article Has Been Published on Fri, 23 Dec 2011 and Read 31951 Times

Find The Best Articles at

Related information on Forex

Forex Trading: When it is not advisable to trade
Forex Trading: 4 Stop Loss Techniques
Forex Trading: Forex Indicators for Beginners
Forex Trading: Creating a strategy
Online Trading: How to do trading with minimum risk
Forex Trading: Spread, Trend and Leverage
Forex Indicators Tell the Trader Whether To Buy or Sell
Make Money with Forex: How to Start
Long-term Trading Vs. Short-term Trading
Forex Trading Education Can Help Traders in Achieving Success
Difference Between Spot Forex Trading and Currency Futures
An Overview About Forex Trading
Top Benefits Of Trading Forex vs. Stocks
Forex Trading Course
Forex Trading: How To Start for Beginners
Forex Technical Analysis - Running the Numbers
Forex Indicators
Advanced Forex Trading Courses
Online Currency Buying and selling: Understand It And Win
The Basics of Financial Spread Betting
Easy Forex Signals Daily Fx Update
Benefits of CFD Trading
Day trading forex with triangle patterns
Getting the Best Advanced Currency Trader Training
Why Some CFD Day Traders Make Money and Others Dont


Useful Resources


Total Category: 571

There are 30 users online.