Most new traders begin to study and learn a successful trading strategy for other traders because they have heard that these strategies are making a good profit.
But when they apply this strategy to trades, they will be surprised that it does not achieve the profits they expect. This is because they used it blindly and without understanding the analysis system.
The solution to this problem is to build your trading style based on the type of analysis you learn. In this article, we will talk about ideas you can use to create your trading style.
The importance of creating your trading strategy
Complementing the importance of using your trading style makes you confident in executing trades; that is, it does not make you distracted. It provides you with a convenient environment for trading.
For example, if you studied a trading strategy for a trader who is making good profits, and when you applied this strategy to your trades, you lost several deals in a row, at this time, you will lose your confidence in this strategy, and you will likely search for another method.
Steps to create your trading strategy
Now let’s get to know the essential tips that you must follow to build your trading system
Step 1: Trading strategy – Study the market
Before jumping into creating your trading strategy, you should develop your understanding of how the market works.
By reading widely in technical analysis and fundamental analysis, such as interest, inflation, supports and resistances, Elliott waves, and others.
And you should too..
Study supply and demand.
The law of supply and demand governs all free markets that are not subject to control by anyone, and this is what is available in the trading markets, so you must understand the law of supply and demand well.
Do not be blind in following the economic and technical analysts. It would be best if you made the decision based on previous understanding and study.
Do not make your trades complicated. You can start with some technical analysis and then develop them, adding other tools.
Step 2: Trading strategy – Choose the right market for you
Indeed, the markets are not the same as the forex market is different from the stock markets, and it differs from the futures markets; each has its nature.
Also, you should know how the margin is calculated in the market you are trading in.
But if you choose to trade in the stock market, you must know the meaning of the stock, you must know the difference between the preferred stock and the regular stocks, for each of them has advantages and disadvantages that differ from the other
The basic idea is that you should not trade in the market without knowing its nature, and knowing the size of the losses that you may suffer, it is assumed that you understand everything related to this market and know all the terms related to it.
Step 3: Trading strategy – Choose a trading time frame
The timeframe varies according to the type of strategy followed, so if you are going to implement long-term trades, you cannot trade on the 15-minute time frame, and if you are going to execute scalping trades, you cannot trade on the weekly timeframe.
Now that you know the types of trading strategies, you will choose the right one based on your circumstances. If you have time to observe the market for long periods, you can choose between day trading strategies and scalping strategies.
If you have been part-time for a lot of time, you will choose between medium-term and long-term strategies.
Step 4: Choose a trend
If you are trading with the market trend and rely on the most straightforward analysis tools in your trading, you are likely to make profits, but if you trade against the trend and use the most powerful trading strategies, your success rate will be fragile.
Therefore, identifying the trend is necessary; you can use any technical indicators to determine the trend, such as moving averages or drawing manual trend lines.
Step 5: Determine when and where to enter trades
Even if you are trading with the trend, determining the areas you will enter is very important.
Candlestick patterns are useful tools for identifying entry points. Technical indicators such as the RSI and Stochastic can also be used as they are also good options.
Step 7: Identify your risks
Once you have created and ordered entry and exit rules for your trading style, you can manage the risks for your trades.
The primary way to do this is by determining the size of the contract.
Step 9: Test your trading strategy
Now that you have designed your trading style, you must test it on previous prices and data. This can be done using one of the test scripts of the trading strategy on the chart, which reloads the previous prices as if they are current prices and they are on the trading platform.
Using the manual method, you download the previous data to the currency and then apply the terms and rules of the strategy (without any test script).
Step 10: Plan on how to improve your trading strategy
With the time of using your trading style, you will gain more experience from the market that will make you able to develop your trading strategy. Still, you want to shorten the time and conduct an evaluation process of the plan every period to find out its weaknesses, remedy them, and know its strengths to achieve more Profit.
Also, avoid making fundamental changes to your trading strategy.
Follow the steps above, and you will find yourself building a successful trading strategy.
This strategy is not a constitution. But it is shaped by your experience and according to your trading style.
Traders can share their trading strategies with other traders. Still, they cannot guarantee that they will achieve the same profits they perform, as each trader differs from the other in implementing trading strategies.