These days there are hardly any novice traders who don’t copy the trading strategies of others to try out their luck. A lot of them only learn the trading tools and indicators from mutual friends and jump into the field with the hope of making quick profits. However, if you want to make more money long term and understand the trade of financial instruments thoroughly then it is advisable that you first devise your own trading strategies and then do a trial and error with them.
But with all that is said above, there is one unfortunate fact that the majority of the new traders don’t also have the right knowledge about making the most profitable trading strategies. Hence to help you in the process, below is a step-wise guide that will assist you in creating a strategy which can work for any kind of trading including forex trading (dollars to pounds) or cryptos trading, etc.
1. Know Your Market
Before you start off with making a strategy, you should understand the market that you are going to operate in. You must do all the fundamental and technical analysis on your own, along with knowing whether the decision to invest and trade stocks will work for you or not.
2. Select The Time Frame
Once you are done with knowing the market of your trading, the next thing that you have to keep in mind is the time frame that you want to invest or trade CFDs and stocks in. You should figure out on your own whether you are a better fit for quick scalping or daily swing trading, all based on your circumstances.
3. Pick Up A Tool To Try The Trend
Now comes the time of tools that you have to choose to check the trend. It doesn’t matter if you use Pin Bar or Gimmer Bar, just make sure that you are using one by looking at the context of the market and have price action tools like swing pivots, trend lines, and MACD etc.
4. Decide Your Entry Trigger
Along with knowing the right market context, you still need the entry triggers to know your breakthrough point. Here again, you can choose simply choose bar or candlestick patterns for simple USD to GBP conversions. But in case, that doesn’t fulfill your needs then indicators like RSI and stochastics are another option that you can try while also integrating it with the trading platform of your choice.
5. Mark Your Exit Trigger
It doesn’t matter if you trade and invest in commodities, indices, or stocks, there will come a time when the market will go against you. Hence to exit the market when everything is going wrong, you should plan your stop-loss in advance (even for online forex trading of pounds to dollars)
6. Limit Risk
With entry and exit triggers in place, the last thing that you have to do is to work on limiting risk. One of the ways in which you can achieve this goal is by position sizing as that will determine how much money would you be willing to put on the line.
You will have to watch your position size carefully because double the position size, double will be the risk in any kind of trading.