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Building A Forex Strategy

Date: Tuesday, December 31, 2019 6:25 AM EDT

One of the biggest mistakes that many new Forex traders make is wrongly believing that they do not need a strategy.

Lots of new FX traders think that successful forex trading is about merely looking at the charts and being able to trade on a hunch, anticipating where price is heading next.

However, these traders all find out the hard way that trading without a strategy is a recipe for disaster.

Having a solid Forex trading strategy is a vital part of achieving success as an FX trader and certainly vital to maintaining success.

A good strategy specifically sets out the exact trade setups you can take so that you know what to look out for in the market. It determines your risk and also your reward, letting you know where to place your stops and targets and at what size to trade as well as how to manage your trades.

So, how do you build a Forex strategy?

Time

The first thing to consider is time. How much of it do you have available to trade? How much of it do you want to spend trading?

If you work a fulltime job, you most likely only have mornings and evenings to place trades and can maybe quickly monitor progress on a break. This means that higher time-frame swing Forex trading will be most appropriate.

This is where you place trades using the daily or H4 candles and typically hold a trade for 1 – 2 days.

Alternatively, if you have a lot of free time and like to be more active, shorter time frame trading such as day-trading will be more appropriate. This is where you trade from as little as a 5 – 10 minutes per trade up to one day.

Learn or Develop

The next step is to decide whether you want to learn techniques and setups that other FX traders already use successfully, or whether you want to develop your own.

Again, time and motivation are important here. Developing a strategy requires a lot more time whereas learning a strategy already in use by other Forex traders can help you quickly get up and running in the markets.

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