Forex trading strategies are important rules or clear cut objectives set out by the trader at the beginning of his or her trade to guide his or her activities. This defines the conditions that are necessary for the trader to enter or exit a trade. It represents the guiding principles that determine whether a trade is worth entering or exiting, so as to make the most out of the trade. In other words the trader sets up some specifications for the type of trades he or she would like to enter into. It is extremely important to have this set of guiding principles or you may not have any direction. It involves things like exit strategy, entry strategy, but before arriving at this, the trader is expected to have studied the market and accumulated a lot of data to give him the ability to make informed choices.
WHAT EXACTLY IS A TRADING STRATEGY?
This refers to a set of rules, specifications for choosing trades, exit points and the management of money either the income of capital. In reality, there is no effective way to avoid making blunders without having a trading strategy. Our personalities, emotions and all sort of things get in the way of our trading without having these guide posts. Besides the flux in the forex market can get us drown such that we cant see clearly without having clear instructions which a forex strategy provides. After getting a suitable strategy what has to come after is the discipline to work things out, to follow through without being distracted. This is very important as a well planned strategy is useless if not followed.
Another point worth noting is the difficulty in arriving at a suitable strategy, it requires, time experience ansd skills. All of these are not on the side of the novice. also, simply having a great strategy is not the end of the story even when it is religiously followed. yet it has a way of keeping confidence up and avoiding disappoint especially if it has been working in the past and suddenly appears to fail.
DEVELOPING A FOREX STRATEGY
Since it is so important for a forex trader to have a strategy, the next question is how one can arrive at one. This is how. There are two broad types of strategies to consider, they include;
1. Technical trading strategy
This depends on technical information such as averages, signals and other such technical indicators
2. Fundamental trading strategy.
this particular type of strategy factors in other important points like profitability, government policies and a lot of other issues.
No particular strategy can be said to be better than the other, the final decision has to lie with the trader eventually. And most times each trader can borrow from here and there.
A forex trading strategy is a set of rules the trader set for himself or herself to provide checks when trading, there are many things to consider when choosing one. Automated systems do not replace the need for a strategy.
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