The currency trading business has gained huge popularity over recent years. The majority of retail traders feel safe to trade the market as no one has the power to manipulate it. Though investing money in the Forex industry is easy, securing profit consistently is very hard. As a new Singaporean trader, you must remember that you need a professional strategy to deal with the critical price movement in the Forex market. Without having a solid plan, it will be impossible to become a successful trader.
In this article, we will learn some advanced techniques we can use to create a robust trading strategy and make our lives much better. Let’s get into the detail.
Why you need a suitable trading plan?
Trading without a suitable plan is just like searching for treasure without a specific map. As a currency trader, you will face hard times provided that you don’t have a well-balanced trading strategy. But having a trading strategy is not enough. You have to follow it properly or else you can’t take the right step. While creating a strategy, make sure you have a draft plan. Instead of developing a strategy overnight, invest time and put proper effort into developing the best system.
Developing a prototype
Creating a theoretical plan will be the first step to develop your strategy. To identify the trade signals, you need to know the exact process by which you analyze the market data. Visit home.saxo and get a demo account so that you can test different trading techniques without risking any real money. Identifying the key parameters of your strategy is the next step. The parameters should be selected depending on the timeframe you choose.
As a trader, you can either use the lower time frame or stick to the higher time frame strategy. Since you are new to this profession, we highly encourage you to develop the trading plan by using a higher time frame. The higher time frame usually gives better signals and helps retail traders to execute quality trades. As you become more skilled, you can create a new strategy based on the lower time frame.
Risk management technique
Risk management technique is the most vital part of a trading plan. No matter how good you are at trading, you might lose the trade from the very best signals. So, if you trade with high risk, you can lose a big portion of your investment. To overcome this problem, you should do position sizing carefully. Sticking to one position will be effective for gaining success as it will keep the overall risk exposure low. If you ever get confused about a certain trade setup, ignore the trade. Look for a better opportunity that will allow you to trade with a high risk to reward ratio.
Psychology has a significant impact on your trading performance. It is more like a mental support system that can help you to deal with ups and downs in your trading profession. So, design your trading strategy in such a way so that you can easily work with the system. Let’s say that you love to trade conservatively. So, if you develop the strategy based on the lower time frame, you will feel uncomfortable. You need to create a system based on a conservative approach so that you can easily work with that system.
Before you finalize a trading strategy, you need to ask yourself whether you are comfortable with the system. If not, go back to the demo account and revise your trading strategy. At times, you might have to redesign the complete strategy from the scratch but there is nothing wrong with it. Remember, your strategy is going to define the profit factor. So, there is no need to rush while you are developing your trading edge for the first time. Carefully create a system so that you can trade more easily.