Through years, experts have come up and experiment many trading strategies so that they can find the suitable strategy to reap huge profits while trying to minimize losses. As a novice trader that begins to explore the world of trading, it is important to know how the basics of Forex first and the risks involved. Subsequently prior to trading the markets, you need to have a way to tackle the market (a Forex trading strategy) to get what you are looking for profits.
In order to do so, you have to start off with some development of basic strategies and rules that make them work. You have to first understand what kind of trader you are or your trader profile. This is heavily related to how you are going to define your Forex trading strategy.
There are basically four main points to think about before you risk that money in the live markets.
1. Fundamental or Technical
Are you going to trade with just only fundamentals, technical or both? Developing your own set of trading rules defines your rationality during live conditions, failure to stick to your own rules result in failure as you're trading through your own emotions by then.
2. Currency to trade
With the vast sea of different currency pairs, it is not wise to go after all the pairs thinking that you'll be more profitable. It will just result in you being more disillusioned and loss of focus in trading. Develop your acumen on 1 to 2 currency pairs and learn about their behavior. You will be better at identifying opportunities quicker and capitalizing on them.
3. Time frame
There are a number of time frame to choose from and there are only 1 or 2 time frame you will find yourself comfortable trading on. Developing a strategy for a 1 hour chart may have a weakened effect on a 15 min chart and determine on how long you are willing to hold on to your positions.
For example a trader with his day time job may prefer to a long term trading strategy holding onto long term positions as he is unable to monitor the trade all the time. While short term traders will just hold on to their positions for a few minutes to hours as they might not want to expose their positions to too much risk overnight or over the weekend.
4. Write a Trading Plan in Hard Copy
For every trade that you made, it is always wise to have your trading plan drawn up with your defined Forex trading strategy and rules in place. That way you will not get put off guard nor put yourself into difficult situations where you realize that the current trade you've executed is not your style of trading.
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