Tag: Strategy Basics

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Forex Basic Strategies

Undeniable Proof That You Need A Trading Strategy

If you are new to trading or are simply thinking about joining and have spoken to another trader, they most likely would have asked you what strategy you are using. While for many it is quite a straightforward question to answer, for others it is not quite so simple. There are thousands of different strategies […]

If you are new to trading or are simply thinking about joining and have spoken to another trader, they most likely would have asked you what strategy you are using. While for many it is quite a straightforward question to answer, for others it is not quite so simple. There are thousands of different strategies […]

If you are new to trading or are simply thinking about joining and have spoken to another trader, they most likely would have asked you what strategy you are using. While for many it is quite a straightforward question to answer, for others it is not quite so simple. There are thousands of different strategies out there, and some traders even trade a hybrid of more than one strategy at the same time. What is important though, is that you have a strategy, no matter what it is, it is imperative that you have one, and we are going to be looking at why it is so important to have a strategy, no matter what it is.

Gambling Is A Loser’s Game

If we are to trade without a strategy, we are effectively just gambling. There is no other way to describe it. You are taking a wild guess at what the markets will do or you are using a hunch, but that hunch is based on no real facts or figures. Due to this, you are simply placing your bet and hoping that the markets go the right way. The problem with this is that the markets like to move how they want to move and they do not always move in one direction for long enough for a gamble to be effective. What’s worse is that if your first trade losses, you will simply place another trade with no real reason behind that one either. You need to lose a strategy, the strategy gives you rules to follow and ensure that your trades have the best opportunity to profit, rather than simply placing trades and hoping that it is a loser’s game through and through.

Strategies Give You Rules

One of the things that a strategy will give you are rules, house rules are there to ensure that your trades are consistent and that the trades that you are putting on have the best opportunity to be profitable. When we have a strategy in place when we place a trade that is not in line with the rules that we have set out we consider it a bad trade. We are trading outside our strategy and so the profitability factor or risk and reward ratio of that strategy is no longer accurate making it far harder for us to keep track of how well the strategy is doing or how well we are doing as traders as a whole. Once you have set rules, stick with them, this is the best thing that you can do in order to ensure that you remain profitable.

Strategies Give You Stability

The rules that we set out above are there to give us stability. Those are the main reasons behind them, and due to that, using a strategy gives us a lot of stability when it comes to our trading. It makes us consistent in the trades that we are making. It ensures that we are always placing good trades and ultimately it can make our profits and overall capital a lot more stable.

Strategies Protect Us

A major part of any strategy is the risk management that comes with it. The risk management part of strategies are there to help protect your account, they include things like your risk to reward ratio, stop loss locations, and other elements like that. All designed to limit the amount that you can lose with each trade and to ensure that you do not blow your account too quickly. We need to trade with risk management within our strategies, if we don’t, no matter how good a strategy actually is, a single trade can actually cause you to completely blow your account.

Strategies Help You to Focus

One fantastic thing that strategies help us to do is to focus, they help us to avoid distractions and they help us to concentrate on what it is that we need to be doing, rather than looking elsewhere. We know what we are looking for in the markets, and exactly what we need to do. This really helps us to focus on what we are doing which in turn can make us a lot more efficient in our trading.

They Can Save You Time

When you use a trading strategy you will know what you have to do. This will help to save you time from analysing or looking at things in the arts that you certainly don’t need to. Much like when we mentioned keeping focus above, using a strategy can help you to save time as you are focused on what you are doing. It also helps you to avoid some distractions. There have been plenty of times then we have wasted a lot of our time by looking at things that are completely irrelevant to our actual trading, the strategy helps you to avoid doing this. At least not all day like we have been guilty of before, ending up with no trades for the entire day.

They Help You Learn

Many people think that strategies are only there to help us to trade, but they also help us to learn. They help us to better understand why the markets may be moving the way that they are and they help us to better understand the way that we trade. The more strategies that you learn and understand, the more of an understanding of the overall markets you will have. Multiple strategies also give you more of an opportunity to trade in different trading conditions, allowing you to be far more profitable throughout the year than you would using just one or even no strategy at all.

Those are just some of the reasons why you should be using a trading strategy, they can be relay helpful in your trading, your results and overall they are what make us traders, as long as you are using one you should be on a positive step towards being profitable, just try to avoid trading without one, that is simply gqambling and will only lead to losses in the long run.

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Forex Basic Strategies

Differences Between Good and Bad Strategies

You have been told that you need to create a strategy, you cannot trade without it, however, once you have made your trading strategy, how do you know if it is any good? How do you measure whether it is a good strategy or not? Of course, you can look at whether it is profitable or not but there are plenty of other things that you can look at to work out whether the strategy is a good one or not, most of those reasons will be personal to you. So, let’s look at some of these factors that determine whether a strategy is good for you or not.

You have been told that you need to create a strategy, you cannot trade without it, however, once you have made your trading strategy, how do you know if it is any good? How do you measure whether it is a good strategy or not? Of course, you can look at whether it is profitable or not but there are plenty of other things that you can look at to work out whether the strategy is a good one or not, most of those reasons will be personal to you. So, let’s look at some of these factors that determine whether a strategy is good for you or not.

You have been told that you need to create a strategy, you cannot trade without it, however, once you have made your trading strategy, how do you know if it is any good? How do you measure whether it is a good strategy or not? Of course, you can look at whether it is profitable or not but there are plenty of other things that you can look at to work out whether the strategy is a good one or not, most of those reasons will be personal to you. So, let’s look at some of these factors that determine whether a strategy is good for you or not.

It should be personal: A good strategy needs to be personal to you, it needs to have been created in a way that suits you and the best way for that to happen is for you to create it yourself. This way you know the ins and outs and exactly how it works, if the markets suddenly decide to change, you need to have that understanding of the strategy in order to adapt. If you were to take a strategy from someone else, then you do not have a full understanding, as soon as the markets change you will be stuck, not knowing how to adapt it. So creating it from scratch is paramount and will help to really make that strategy your own.

It needs to be specific: The trading strategy that you need has to be quite specific, it should be focusing on specific things rather than being too broad. If a strategy focuses on just one or two currency pairs, this way the strategy will be able to more easily be adapted to the changing markets or if there is a dramatic event in the markets. If a strategy is trying to cover all bases and all currencies then it will struggle, each currency behaves in different ways and so there cannot be a group of settings that can cover them all, this will only result in there being issues when things go wrong or if the settings do not match the characteristics of one of the pairs.

Opening lots of trades: A good strategy will be able to pick its trades well, it will use very specific criteria before opening one up. What you do not want is a strategy that is opening tens of trades when only one is needed, some strategies do this to increase the volume being traded or the entry requirements are so loose that it allows for lots of trades. This is also sort of related to the precious points of being specific, if it is relevant to too many pairs then it may open too many at a time. When we look at trading, we are looking at quality and not quantity.

Risk management: A good strategy will have its risk management built into it. This will include things like the stop losses, the take profits, the percentage of the account to risk on each trade, and just simple methods of keeping your account safe. A bad strategy will unfortunately not include some of these things that can make them far riskier and dangerous, if a strategy does not have any risk management attached to it then we would suggest looking for a different one to use.

Can it cope with change? A good strategy will need to be able to adapt to the changing markets, they will always be changing, on a day to day basis and on a larger scale over the months and years. If your strategy is not able to handle any of those changes due to it being too rigid and requiring very specific requirements without the ability to alter them, then it would be considered a bad strategy. You need to be able to make adaptations or the strategy will only lead to eventual losses.

So that is a non-exhaustive list of things that could cause a strategy to be either good or bad, there are of course a lot of other things too, but these are some of them. Try to keep your strategy personal and specific, those are the main points to take home.

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Beginners Forex Education Forex Basic Strategies

What to Consider Prior to Changing Strategies

At some point throughout your trading career, in fact, in quite a few points, you will be required to change up your trading strategy. While it may have been working really well at one point the markets will not remain consistent forever and they will change, you will then be required to change with them, if you do not, then you are putting yourself into some additional risk and could be putting your account in danger, as your strategy may not be as effective in these new conditions as it was in the ones that it was created for.

At some point throughout your trading career, in fact, in quite a few points, you will be required to change up your trading strategy. While it may have been working really well at one point the markets will not remain consistent forever and they will change, you will then be required to change with them, if you do not, then you are putting yourself into some additional risk and could be putting your account in danger, as your strategy may not be as effective in these new conditions as it was in the ones that it was created for.

At some point throughout your trading career, in fact, in quite a few points, you will be required to change up your trading strategy. While it may have been working really well at one point the markets will not remain consistent forever and they will change, you will then be required to change with them, if you do not, then you are putting yourself into some additional risk and could be putting your account in danger, as your strategy may not be as effective in these new conditions as it was in the ones that it was created for.

There are a number of different things that you can do to help you prepare to change your strategy, these can either be used to help you to alter your current one or some of them can be used to help you adapt yourself in order to use a completely different strategy that varies a lot from what you are used to, so let’s take a look at what some of these things are that could potentially help you change your trading strategy.

The first thing that you need to be able to do is to understand why you need to make a change, there could be a number of different reasons for this. Maybe you are currently risking too much of your account per trade and so you need to scale back your lot sizes. Maybe the markets have shifted, your strategy worked well before but there are now different trading conditions that it may not function at 100% in, so you need to make some changes to match the markets. Maybe you need to change things up because your risk management isn’t quite working or your risk to reward ratio is not quite right, whatever the reason is, you need to have a good understanding as to why you need to make that change, once you know the reason, it will be easier to focus your changes on what will resolve the current issue, rather than changing things that may not actually need changing.

It is important that you only make a single change at a time, while there may be multiple different things that need changing for your strategy to be ready, it is important that you only do it one thing at a time. The reason for this is that when you make changes, they can either work or not work, you do not want to be changing 5 things at a time if one of them is not working how will you know which one it is? When we are changing just one thing at a time, we can see straight away whether that one change is effective or not. If it is not, then we can adjust again, if it is then we can move onto the next thing to change. Of course, changing some things can then also affect something else that you had previously changed, but at least when doing it one thing at a time, you are able to better track what the effects of each change are and whether individual changes have worked well.

You also need to have a good understanding that once these changes have been made, you cannot just leave them, things will be constantly changing so you need to be prepared to continue to make changes as the conditions of the markets continue to move on. A strategy is never complete, this is something that a lot of traders see to forget, no matter how much you have worked on it, it is not complete, there will always be things that need changing and adapting, this is due to the fact that the markets will never stop changing themselves, you must stick with them no matter what they decide to do. So while your strategy has been changed and is now working, you will need to make further changes in the future. I mentioned that a lot of times just then, hopefully, that helped it to sink in, once again, the markets will always change, so you will always need to adapt your strategy.

So you are looking to make some changes, where are you going to do this? Are you going to make the changes directly onto your life account or are you going to implement the changes onto a demo account? Hopefully, you went with the latter option. You should not be making any changes on a live account, you do not know what effect these changes are going to have on your strategy or the profitability of the strategy. This is why we always test all changes on a demo account, if it works, fantastic, we can then move them over to the main account, but what if they do not work, and we are using a demo account, it makes no difference to our live account, we can just revert back and try again with zero risks. If you were to attempt this on a live account and it goes wrong, then you have put your account in danger and could potentially lose a lot of money if things go wrong and you cannot rectify it.

What if you need to go with a completely new strategy? One that you have never used before. You have been using your current strategy for quite a while now, so making the huge leap onto a completely different strategy can be a little daunting. Some of the reasons why you may need to do this could simply be that your current strategy does not suit your style of trading, or it does not work in the current trading environment. When you make such a huge change, it can be hard to forget some of the things that you had been using in the past. You need to understand that you are starting fresh, ignore all the little things that you may have done with your previous strategy, you need to follow the new rules that you have set out and only those rules, when you try to take in some of the little extra things that you did with your previous strategy, there is a good chance that they can contradict the things that you are doing with the new one, so stick to the new rules, not the old ones.

Going along with the above when you make small changes to your strategy, it can actually be quite hard to get old habits out of your mind, you are so used to doing the same thing over and over, as soon as one little bit changes, it can be hard to adapt to that. This is far more prevalent in those that have changed just one thing if you have been using your strategy a certain way for a long time, you can naturally want to do things the old way, you need to set reminders about the changes that you have made. When you change your entire strategy, it is easier to remember the changes than it is when you only change a very small part of it. So set yourself reminders or put something up on the wall to remind you of the change that you made and what you need to do to stick with it.

So those are some of the things that you should be keeping in mind when you decide to change up your strategy or even go with a completely new strategy, it is important to know that you will need to keep on adapting and so getting these things into your head beforehand can make thing booths easier and safer when you eventually implement any changes.