A Working Forex Trading Strategy

Any successful trading strategy must incorporate money management, technical analysis, fundamental analysis and discipline. A trader must review is previous trades and make a note of the trade setups that have worked in the past and resolve to stick with the tried and true.

Over the years I have traded currencies I have refined my trading strategy and have come up with this strategy that works pretty well for me. I thought I would include it here to give other forex traders a look at what works for me. I know it is not common for a trader to share his secrets but having seen to pain and expense that ignorance and inexperience can cause, I thought I would help shorten the learning curve of as many traders as I can.

Before I enter a trade, I will check a number of factors. Of course I don’t always do a fundamental analysis for every trade because I generally specialize and so I am constantly aware of the realities surrounding a given currency pair.

Before I enter a trade I check a number of things, here there are.

- Determine the trend or price range - Establish that there is a clear trend or range.
- RSI levels – If a pair is overbought I will be averse to buying, likewise I would be averse to selling if it is oversold.
- Pivot Points – Pivot Points generally define a currency pair’s daily price range. So if a pair is in a large up-trend I will be looking to enter a long trade at the pivot point or at the pivot point S1 (support one). Good setups usually include a chart pattern that is supported by on of the pivot lines.
- Money Management – At all cost resist the temptation to go beyond a 5:1 leverage and don’t add to a bad trade. If traders would content themselves to take smaller gain they could sustain more losses and prevent margin calls, and hopefully allow them to make a profit before the trading account is ruined.
- Check other risks – Check that there are no pending news release that could cause huge price movements within an hour or two of entering a trade. Also if the spreads are unusually wide this could be an indication that the market is illiquid and therefore more unpredictable.

If anyone of the above trade checks is not to my liking I will close the platform and go do something else. This helps me avoid the temptation of entering the market in less than ideal conditions. No one is holding a gun to my head and forcing me to trade, it is my money and if I don’t see the right conditions I don’t have to trade; there will always another opportunity tomorrow, I can wait.

Consider the pips lost, while waiting for the patterns to form, as insurance against making a very bad Patience/Discipline trade. Even though ones intuition may says otherwise.