Some Qualities of the Best Forex Strategies
It seems that every trader is looking for the best or new forex strategies all the time. This may come as a shock to you but jumping from the one forex strategy to the next as soon as you have some losing trades is a big mistake, and prohibits you from making real progress in your forex trading.
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Accept the fact that you will have some losing trades
Even the best forex strategies available have some losing trades. If you are looking for a forex strategy with a 100 % win rate, then you will have to find something else to do, because you will not find such a strategy.
Losing trades are part of forex trading, and the sooner you learn to accept this fact, the better off you will be as a trader. The key to losing trades is to learn from your mistakes, and rather see the losing trades as a learning opportunity than the end of the world!
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Proper money management is crucial
The best forex strategies have money management and stop losses in place that minimizes your losses when they occur. This is the key to successful forex strategies. They all minimize losses, so when they occur it is not such a big deal and you can usually make up the loss with one winning trade.The golden rule is that you should never risk more than 1% – 2% of your trading capital on one trade.I have experienced my biggest losses when I broke that simple rule.
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Do not let your losses run
One of the biggest mistakes in forex trading is to let your losses run. What usually happens is that you are in a losing trade, and when price comes near your pre-determined stop loss you remove or move your stop loss. What then happens is that price continues to move against you, and when you finally realize that you have to exit the trade, you take a huge loss.
This loss is usually so big that it takes you weeks or months to make it up, and it also does damage to your trading pshycology.Fear takes over, and you become hesitant to take new trades and are prone to make mistakes. This is the vicious cycle that leads to forex traders blowing out their accounts and quitting trading forever.
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Minimize your losses
The most important quality of the best forex strategies is that it minimizes your losses by having set rules for stop placement and money management. By having these qualities in place you will maximize your chances of being a successful forex trader.
How to choose the best forex strategy for you personally
When you start trading you are overwhelmed by the choice of forex trading strategies you are presented with. There is no way you can trade more than one forex strategy at one time and you have to make the decision of which one to trade.
When you start forex trading it is very important that you choose a forex trading strategy that you are comfortable with, and that fits your personality and risk tolorance.Trying to trade a forex trading strategy that does not suit your personality is a sure recipe for failure and one of the reasons some many traders fail
Different choices you have in trading strategies
There are a number of factors to consider when choosing your forex strategy. Firstly you have to choose your timeframe and holding period. How long are you going to stay in the trade? You have to decide if you are going to trade intraday or hold trades overnight and are more of a swing or position trader.
Intraday forex strategies are very popular and with such a forex strategy you take between 10 and 50 pips per trade and your risk profile are similar. If you trade an intraday forex strategy you also normally trade between 1 and 10 times per day.
1. Scalping
A scalper trades many times every day and usually takes between 5 and 20 pips per trade. It is only a good forex trading strategy if you are comfortable with trading many times per day, and you must choose a currency pair where the spread are very low such as the Eur/Usd.When the spread are big such as on the GBP/JPY it is very difficult to scalp because when you enter
2. Intraday swing trading
An intraday swing trader makes between 1 and 5 trades per day and tries to catch the major moves of the currency pair in a day. The profit target is usually between 10 and a hundred pips per trade for an intraday swing traderr the trade you start with – 8 pips because of the big spread
3. Swing Trading
A swing trader trades only between 1 and 5 times per week and tries to catch major turning points in a currency pair. Swing trading are usually done on longer timeframe charts such as 4 hour and daily charts and as such a swing trader does not have to spend as much time as a day trader in front of the computer screen. This is a big benefit of swing trading and a reason a lot of people are attracted to swing trading because they do not have the time to sit in front of the computer all dayGenerally it is easier to swing trade than to intraday trade, and the irony is that most people are drawn to day trading because they believe it is easier to make money when you trade short term. That is also one of the reasons more than 90% of all traders fail – the majority try to trade short term.
A famous trading author once stated that day trading is like flying a fighter jet at very low altitude, one mistake and you crash and burn.
So how do you choose which strategy to trade?
You can drive yourself crazy trying to figure out which one to choose and trade.
Some people will say – “Just give me a forex trading strategy that makes money”
Unfortunately it is not as simple as that.When I started trading I was mentored by a exceptionally good trader that traded between 20 and 30 times a day!
He was a scalper and only took a couple of pips per trade,and made an enormous amount of money.
No matter how hard I tried – I could not trade like him.It drove me crazy.I just could not get it right and was very uncomfortable trading that many times a day.
Finally I figured out I am good at picking one or two bigger trades per day, and I am very comfortable and good with that forex trading strategy.
The point of all this..
You have to figure out for yourself what kind of trader you are and what kind of forex trading strategies are best for you.
You have to be comfortable with the trading strategy you follow and make a success out of it.
When starting out you can easily decide this by trying each strategy for a certain period of time like about 2 weeks for day trading and at least 4 weeks for swing trading because of the fact that you have less trades when swing trading. Then you will quickly find out what kind of trader you are and which forex trading strategies suits you
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