Secrets of Developing a Forex Trading Strategy
“Hello. We provide the best forex trading signals based on the forex strategy that we have developed. Accuracy of up to 99%. Get only USD 150 per month. “
Have you ever received e-mails, or offers on Facebook, or where has the same phrase as the opening sentence above? If so, have you ever tried using forex trading signal services from them? If so, are the results satisfying?
For the last question, even if you answer “no” or “yes”, I will still ask this question: “Do you want to be able to create your own forex trading strategy ?”
If you return to answer “yes”, welcome! Please read this article to completion. 🙂
There are many ways to go to Rome
Any trader would want to be able to have a good forex strategy . There are many ways to do this, for example by searching on the internet, or utilizing paid forex trading signal services as exemplified above. (But be careful with claims of “accuracy up to 99%”, because such claims are usually just nonsense!)
Even attending seminars or courses can be an alternative. There are seminars or courses that offer certain trading systems for participants.This certainly saves more time and effort. It’s just that the costs for forex trading training like that are usually very expensive. In fact, it is often too expensive, when compared to the knowledge gained. In other words, you can get a theory that is taught at a much cheaper cost, even free!
In fact, did you know that you can actually build your own forex strategy ?It can even be very fun, easy and – believe it or not – faster than you think.
All want to win, but not all know how
Why do most traders fail to build their own forex strategy ? Because not everyone knows how.
To be able to compile a forex trading strategy , you certainly need to have access to the price movement chart. MetaTrader based trading platform that you can use for it.
In addition, you also need to make notes to pour your ideas. These ideas are what you will later apply to the forex strategy that you will compile and test in the trading platform.
Why do you need to make it yourself
The forex strategy that you arrange yourself will certainly be more in line with your characteristics as a trader. In turn, the strategy will provide satisfactory results, because you know exactly where the advantages and disadvantages are. You will be able to maximize the advantages and cover up the shortcomings easily, because you alone created it.
It’s different if you use someone else’s strategy. Surely that person creates a strategy that matches himself, even though it is not certain that the person’s trading style is the same as your trading style.
When and where?
Before you develop your own forex trading strategy , it’s good to first determine what type of trader you are. Is it a day trader , or is it that you are the type of investor who likes to hold positions for a long time?
This will be closely related to the use of time frames . Will you use one minute, one hour or even monthly time frames? Make sure you choose the time frame that matches your character. Don’t forget, the longer the time frame you choose, the longer it will be that your trading position will open.
After that, you need to also set your focus. Which instrument will you trade in later? Forex, stock index, or commodity? If for example forex: in any currency pair ? If the stock index: Asia or USA? Focus is very important for traders to optimize the reading of market analysis and monitoring.
What indicator is used?
There are very many technical indicators. You don’t need to use it all.Then what should be used?
You can combine at least TWO TYPES of indicators. The strategy that you set up should be able to provide information about trends and instructions when to open a position (buy or sell). For example, you can enter the Moving Average, Bollinger Band, or Parabolic SAR as a trend direction indicator. No need to enter all three, just select one.
As a guide when to buy or sell, you can choose stochastic oscillator, CCI, MACD, and so on. Also do not need to enter too much. A maximum of two oscillators is enough.
Avoid putting too many indicators on your chart, because it can potentially make you confused. Two or three kinds of indicators are actually good enough, provided that the two functions mentioned above (trends and entry instructions) have been fulfilled.
If you are already proficient enough, you might not need technical indicators at all. You can use a pattern , for example. What is clear, you must choose: which indicator you will use, will only use the pattern, or even combine it.
Of course, you must first study each indicator. This does take time, but you can try it first through Backtest . After trying, you will know what indicator you like the most.
Arrange and test
Arrange the indicators you choose into your trading rules. For example, if you use Moving Average, specify what period to use. Then, combined with any indicators (remember, not too much).
Set rules on any conditions you can buy or sell. Equally important is that you also have to determine how much the stop loss (SL) and take profit (TP) levels are based on the strategy that you set it up. Apply a good risk to reward ratio and money management . In this step you are actually preparing a super-important trading plan .
The next step is to test the strategy. There are two ways you can do to test a forex trading strategy : forward testing and backtesting .
Forward testing is testing forex trading strategies in real time . You really follow the market “live”. The disadvantage of this method is that the time required will be very long. For information, a strategy will be considered good if it is able to generate profit consistently for at least 1-2 years.
To work around this you can use the backtesting method . The backtest tool has been prepared in MetaTrader, called “Strategy Tester”. Use price data for the past two years for example.
In conducting a trial, get rid of the desire to get perfect results. It will only interfere with your objectivity. His name is also “testing”, of course it must be objective so that we know where the mistakes must be corrected.
After you test a strategy, do an evaluation. Is the result good enough, or is it bad?
The parameter “good results” here is not “99% accuracy”, but rather whether the strategy can increase capital in a certain period of time.Don’t be too greedy too, 10-15% profit per month is very good, you know!
If the results are good enough, then it’s time to implement the strategy.To be safe, use a demo account for at least one or two months. If it is stable, there is no harm in practicing it in a real account.
If the results are bad, there are two things that can be done: try with other settings , or change the method / indicator, then start from the test phase again.
How, are you ready to create your own forex trading strategy ?
Have a good experiment.