Forex Trading Strategies

Having gathered the information you need to make more informed trading decisions, the next step becomes how do you actually trade your account to best effect. One of the central components of deciding how and in what markets you trade is the trading strategy. From the outset, you might believe your own free-form strategy to be the most effective way to get things off the ground. However, by developing a more consistent pattern of trading, you can not only cut out much of the research effort and time otherwise required, but you can also make your trading more consistent and be best placed to capitalise on earnings opportunities as they arise.

Fortunately, there are countless different trading strategies out there, each of which has been tested, tweaked and deployed in the markets for real. The trick is to find one or two strategies that you feel most comfortable working with and to stick with them as you build your trading account. The advantages far outstrip the loss in flexibility, and can help you work your way up the capital ladder to forex nirvana.

Why strategy matters

Strategy matters a great deal in forex trading, and it is what distinguishes the successful trader from the sporadic, hit and miss investor. It doesn’t matter what strategy you use, so long as you have a firm idea in place of how you’re going to trade, and you have at least a loose blueprint for the management of your portfolio. Strategy is like a road map – without it, you could easily get lost. Having a strategy in places shows you what you need to research, how heavily you need to invest and how well you’re doing day to day.

But it also brings in the often-understated advantage of accountability. You can test different elements of your strategy and your trading behaviour by looking back at you results once they’re in. Note which days brought you the highest returns, what you did on those days, and whether there are any strategic modifications you make to improve your returns more consistently. Having the strategy in place gives you the framework from which you can make these types of decisions.

Settling on a strategy is also imperative for keeping sight of the bigger picture. Sometimes, when you’re up to your eyes in data, markets, interest rates and the finer points of global macro economics, keeping a handle on what’s going on long term can be difficult at the best of times. With a strategy, it takes out much of the structural long-term work you would otherwise need to do. Coupled with targets for performance and objectives you’re aiming to reach with your trading, your strategy can effectively become the framework off which you can hang individual positions and grow the fruits of your research labours.

For the effort and time investment required to devise and settle on a functional strategy, the benefits it will bring to your forex trading are well worth it. A strategy that works for you could end up serving you long term, and pending a few tweaks and tune-ups along the way to improve performance, can bring long-term stability and consistency into the way you trade your capital.

Devising a trading strategy

Knowing you need to have a trading strategy is all very well and good, but actually finding and settling on a strategy that works for you can be an altogether different story. Devising a suitable strategy and trialling it out can be a trying phase, yet provided you know where to look and you give sufficient intellectual and practical testing to your theories and potential strategies before you plough your capital into them, the rewards for finally reaching the right solution for you will be significant.