Skip to main content

How to develop trading strategies?

The main instrument of a successful trader is the author’s trading strategy. We will tell you how to create it.

What is a trading strategy and what is it for?
It is not a secret for anyone that if a trader constantly makes chaotic transactions, the path to a stable income will be closed for him. Therefore, one of the main components of success is a competent Trading Strategy. Newcomers to trading will not make blunders and will begin to receive stable profits due to the established of action in strategy.
From simple Instructions to an integrated System
You can say with confidence that you have a strategy, if you follow certain rules, focus on specific indicators and know that at the end of the trading day there will be more lucrative deals in your History than losing ones.
What is the basis of the trading strategy
So, we are starting to lay the foundation of our strategy. Traders use as the first building blocks are fundamental, technical and proportional trading instruments. Don’t be alarmed if you are not familiar with the names of these categories. Now let’s deal with this. In any case, you should build your strategy on what is most understandable, logical and convenient for you.
Initial Strategy Setup
If you look at the price chart, you will see that there is strong volatility (that is, activity) on the market before the interest rate is announced (for example, by the European Central Bank or the US Federal Reserve). At this time, traders around the world demonstrate their combat readiness to immediately respond to certain changes because after the results have been reflected in the graph, very stable, long-term trends can form. You will learn to see them too. And, perhaps, it will form the basis of your strategy. You will literally develop your system every day because fundamental analysis is much more voluminous.
Determination of market entry points
What moment to open a deal? The answer to this question is the very definition of Entry Points. You must clearly define the conditions under which you receive a signal and make a deal, as part of your trading strategy. It could be news publication, line crossing, level breakdown or something else.
Features of setting indicators
The standard settings of the indicator from its creator are not a panacea. If you change any parameter in the indicator settings, the previous rules for using the tool no longer apply. Therefore, any instrument may be completely useless in the hands of one trader, but to bring millions to another.
Trading plan
Novice traders usually make a mistake. They immediately begin to trade after they have chosen an analytical instrument and studied its features. These traders do not have any trading plan, but there is only a strong desire to earn more. There is only one conclusion: if a trader is unable or unwilling to manage his capital, he will certainly lose deposit money.
Trading Limits
As part of the Strategy, you must control not only the parameters of a single digital contract, but also all other deals. Therefore, professional traders set trade restrictions for themselves. These market members know exactly how many deals they can make today or during the week. You need to try it too!
Loss limits
Your main trading instruments are not only (and not so much) technical indicators, fundamental factors or patterns on a chart. The main instruments, the parameters of which need to be adjusted (that is, thought out) first are the volume of the transaction, limiting losses and limiting profits.
Profit limit
You need to limit profits. It may sound a little silly, but the main goal of the trader is not to maximize profits. Capital preservation is the first and most important task. Therefore, we recommend pre-setting a target profit level for one day, week, or month.