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Forex Strategy Tips

 

Often new traders assume that good strategy depends on moving average, the chart pattern they use, or the different combinations of indicators. However, experienced traders recognize that these criteria are not strategies but an entry point only.



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For an experienced trader, strategy means including risk control, money management, exit point and stop losses.  These strategy allow traders gain profits to run and eventually, cut the losses. But more importantly, experienced traders believes that the strategy varies with individual’s trading personality.



Many of the charts that are being used appear the same. For example, the Brent Crude chart and the Barclays PLC chart almost look exactly the same and if a person had not seen it for a couple of months, he will have a hard time distinguishing them.



Experienced traders play the game smartly. They would only trade for a “specific” item-either they choose to trade Barclays or Brent Crude, but definitely, not both. Since they only go for a “specific item,” a trader of Barclays and Brent Crude can easily differentiate them. The rationale behind this, according to David Graeme-Smith of Short Swing Trading, is because every index, commodity, or share possesses its own “personality.”



There were some who opted to do things their own way, go after the main index or their own sector, become volatile for a day, move the average to 5% and then retrace or put an end at key moving averages.



Moving averages, patterns, and trends as well as analyzing the indicators are not useful. The bottom line is that, using the same strategy is not effective and will not work in all cases since it all depends on the “personality.”



For a strategy to be considered as a good strategy, a trader should consider the following:



  • Know what you wants to trade (share, commodity, currency, index, etc) and specialize on it.
  • Recognize the personality that the item possesses.
  • Go for an entry system that is reliable for the share.
  • Know about effective stop loss system;
  • Be informed on average risk that any typical trade will carry;
  • Learn the exit system that will work effectively for the share;
  • Identify the trading personality and trade it (without overriding it);
  • Prepare a timescale for your trade;
  • Keep a data about the past trades that occurred in order to identify the weaknesses of the chosen strategy;
  • Verify if all the things mentioned will fit the objectives of trading.

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To be able to have a good trading strategy, remember that all the above mentioned should fit together and be able to complement each other very well. Lastly, put in mind also that finding the “good strategy” does not happen overnight-it is a never-ending cycle of repeated testing and refining.





Read Next: How to Make a Forex Trading System Perfect



 

 

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