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How to build a good forex strategy

Discussion in 'Forex Articles' started by rpchost, Jul 2, 2008.

  1. rpchost

    rpchost Private

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    Each forex trader must have his own strategy, we can’t rely all the time on others strategies and forex signal, other FX traders are not better then us; we can develop more profitable techniques. In this article I will give you some tips to follow while developing your currency trading strategy.

    First of all be simple as you can; Forex trading is not simple and it needs good concentration that’s true, but the good news is you can make profit by following simple techniques and stick to it. Don’t use complicated economic indicators; indicators describe the market and do not predict it.

    Second, develop a strategy which do not rely on news release, you can do that by closing a trade before a news release or open it after a news release, and by this way you will not be stopped out because a report came worse than your expectation.

    Combining the second and third rule we will have the following scenario: I see a currency in a downtrend (or uptrend) and I am sure of the trend, but the RSI is under 30, and after a while a report will be released, so what I do is wait for the report to be released.
    At release time we will either see the currency going down very quickly and we will miss the chance to enter into a very profitable trade and it is not a problem as long as we don’t loose pips, OR the currency will go up, in that case the RSI is no more oversold, so we identify a good entry point to enter a short trade. Forex is not so bad and it always gives us new chances and always tells us to enter or exit but we must read well the signs and forex signal.


    Fourth, the most important thing in foreign exchange trading is the entry point; good entry point leads us to profit, bad entry point leads us to loose. You probably hear a lot of traders telling you do not trade against the trend, and that’s right but it is not enough, you must know where to enter a trend , timing is the most important, so where to enter, I will tell you where I enter. For example, let’s assume that EUR/USD major trend is down and I want to enter a short trade. We know very well that currencies move in waves

    [​IMG]

    So most traders see in wave [A_B} a good opportunity to sell but it is too risky for me and it has a good probability to stop me out, if I enter at point I will be stopped out, but If I short at point [C] I will be riding the trend from the beginning and make very good pips.

    At point [C] the currency is no more oversold and probably at point a report has been released and caused a retracement to [C], so at [C] I will enter the corrective wave. With this technique, I will have a 95% chance to hit my target and the spread will be very tight. You see, forex gives you many chances, you must change your way of thinking a little bit and see trading from a different point of view and have our own forex signal.

    About the Author:

    Joe Chalhoub
    Lebanon, Beirut
    webmaster@rpchost.com
     
  2. lion

    lion Private

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    Thanks, good stuff, only the matter is that not always happens, that have time to seize a trend, often enter into the transaction already toward the end a trend.
     
  3. martin01

    martin01 Banned

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    If i could add to 2 things for a good strategy:
    1. constant improvement to the strategy-and
    2."sticking" to the plan thoroughly

    Agree wholly with "keeping it simple"
     
  4. profitmaker

    profitmaker Recruit

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    The whole idea of trading is creating a good strategy. You can use your mix of indicator and create your own expert advisor…or you can try one from somebody else. But the key in strategies is to be comfortable with your system and your rules. In my case I follow three simple rules and play with envelopes and moving average.
     
  5. sam111

    sam111 Private, 1st Class

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    A good forex trading strategy will not actually be a forex system, but an analysis that breaks down several different areas of the market itself that will consistently produce a profit. You need to develop a way to spot trends and quickly and accurately as possible so that you can take full advantage of them when they occur.
     
  6. Aimak

    Aimak Recruit

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    Having about 3 months experience in FX trading, I fully agree with these basic strategy premises.

    I'd like to complement what rpchost said about the entry point. I observed it is often better to wait for the M15 candle to finish. I'm developing my scalping strategy in M15 TF. Most of the pull backs and bouncings happen begining a new candle.

    Also for the trading strategy its important is the currency pair of choice. Each pair has its own "personality" and characteristics. When you get to know a pair, after many hours watching at it and studying it, you will find easier to see the trend or to "foresee" the next move ;)

    In all, I believe that for begginers the best starting strategy is by learning to identify the S/R levels and use trade them. Just you and the price. Pure and simple. Form the bottom up. Later you can add helping indicators. Its like learing calculus: you first learn to calculate using the brain, later you use a calculator.

    greetings from Spain
     
  7. fxvoilaaa

    fxvoilaaa Recruit

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    good article.
     
  8. Crazypips

    Crazypips Recruit

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    I can tell you from my own experience, any Brokers don't like traders who make million for one day.
    So you should trade and do it progressive.As fo me, news are often very helpful and sometimes you can earn thousands, just after attentive reading news.
    Start to think and try to analyse the siuation and learn the situation in country.
    As for me, it is very usefull
     

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