Review Category : News

Creating Your Own Forex Strategies

Creating Your Own Forex Strategies

There are many forex strategies out there that you can use.  Of course, it is possible to create your own forex strategy by combining the parts of other strategies into something you can use.  There are certain aspects of the trading strategy that you have to consider when you create your own.  You also have to think about your trading style and how well the new strategy will work.

Forex Strategies Timeframe

The first aspect of forex strategies that you need to consider is the timeframe they are working in.  The timeframe you will be using when you create your trading strategy should coincide with your trading style.  There are three different timeframes that you should look at and they are short, medium and long-term.  Each of the timeframes offer different types of trades and require different types of analysis.

The Currency Pairs

There are certain currency pairs that trade better over the long-term.  There are also other pairs that trade better over the short-term.  When you create your own trading strategy you have to consider which currency pairs you are looking at.  You should also consider whether they fit into long or short-term trading.

Highly volatile pairs are better for short-term trades.  Pairs that range for prolonged periods are better for long-term trades.  The best way to identify which currency pair you should be using is to look at what other strategies are using.  You can also see what pairs expert traders recommend for the different timeframes.

The Analysis

When you create your trading strategy you should not just choose between technical and fundamental analysis.  You also have to look at the tools you will be using for the technical analysis and the impact of the fundamental data you are going to use.  It is recommended that you have a combination of technical and fundamental analysis to ensure that you know exactly what could happen on the market.

If you are going to be using fundamental analysis you have to note all the news releases you are going to use.  You should also think about the fundamental tools that you need.  For fundamental analysis you are going to need a news feed and a forex calendar.  You should also have some idea about how the market has react to news in the past.

If you are using technical analysis then you should consider the tools you will need.  You have to see which analysis methods are going to work for your overall strategy.  Should you be using a MACD histogram or Bollinger Bands or a combination of different tools?  When you choose the tools you need you have to keep it as simple as possible.  The more complicated you make the strategy the more likely you are to make bad trades.  It is not easy to locate the weak points in a complicated strategy.

Testing the Strategy

Once you have created your trading strategy you will need to test it.  Using a demo trading account is the best way as it simulates the market.  When you test this you have to trade according to the strategy.  You also have to take certain aspects of the demo account into consideration like the slower execution of trades when you trade live.

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Forex Trading Strategies For Part-Timers

Forex Trading Strategies

Forex Trading Strategies For Part-Timers

Some people are not able to trade on a full-time basis.  These traders may have to undertake trades at the office, during their lunch break or when they get home from their full-time job.  This causes most of these traders to miss opportunities because of the liquidity of this financial market.  This could mean a missed opportunity to buy at a favourable price or a total loss of funds if a trade is not exited at the right time.

Time of Day or Night

There are particular forex trading strategies that this type of trader can use to alleviate the problems associated with part-time trading.  One of the strategies would be to trade based on the volume of trade during the 24 hour period.  You should trade in the currency pairs that are most active during the times when you are able to trade.  You may need to change to a less popular trading pair.  Check on the correlation between the pair you choose, so if you have a certain time of day when you have available time, you should study the marketplace and implement your trades.

Traders who have an inconsistent schedule have particular needs for trading.  These traders often pop in and out of the market throughout the trading period.

Stop-Loss

If you are only able to trade for about an hour every day, you will do better to use your computer as a partner.  Not being able to watch the market consistently, you will miss opportunities and having a software programme do the work for you may be a good idea.  An alternate strategy to use is to set stop-loss orders so if there is a sudden move in the market, you will be protected against losses.

Prices

If you have the chance to pop in and out of the market during your working day, you could rely on price action trading.  This requires you to analyse the charts or technical results of your currency pair and base your trades on what the charts indicate.  Choosing a time frame on the chart that suits your schedule is vital to using this strategy.

Other Forex Trading Strategies

If you fall into the category where you cannot even trade for short bursts or for a block of time during your day, there are other methods you can use to continue forex trading.

  • Investigate long-term trends.  Rather than depending on hourly charts, you should analyse the charts for a full day or a week.  This will give you the opportunity to trade even if you can only access your computer on a daily basis.
  • Use the available technology.  You can set up mobile phone alerts or email alerts to keep you up to date when you are not trading.
  • Once you have studied the market, you could choose to take fewer positions and hold them for a few days.  This will require knowledge about your currency pairs so you must understand what drives your pair and know the economic movements related to that pair.  Add stop-loss orders to all the trades you make to ensure minimal losses when the market takes a dive against you.

 

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