Building a good strategy is a Important – until Is mandatory – The thing you can do As a day trader. Unfortunately, this is an area where most traders fail.
Professional traders are also invited to take on this challenge, but it can be more difficult for those who start trading.
Therefore, in this article, we will explain what a trading strategy is and how new traders can build their own strategies from scratch.
What is the trading strategy?
a The trading strategy is a game plan or work plan That will help you in the financial market. It is simply the process This will guide you when opening and exiting trading positions. In most cases, the strategy will answer several questions such as what, why, when, where and how.
what or what
on me what or whatthe strategy will direct you to Determine the origin in which you will trade.
This is notable because there Multiple types For assets in the market such as stocks, commodities, cryptocurrencies, indices, etc. But that is not the only “what” that needs to be answered.
If your idea is to focus on stocks, you should first select the sector and then focus on a few companies. The same goes for goods.
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Why will give you Reasons will look at Before you open a particular deal. Some of the reasons you can consider when entering a position are a bullish or bearish crossover or the underlying trigger.
You must specify the reasons that must be fulfilled when executing the transaction. This step is essential: “Why” is one of the main elements of a trading journal.
when and how
When I will give you perfect time The day you will trade How It will describe how you place trades.
Understanding Best time to enter (or exit) a trade It can make the difference between making a profit or losing money, especially for a speculator.
The ‘HowIt is often underestimated. You might think that all you have to do to trade is to press a few buttons, but that’s not the case. Many market orders can help you avoid problems and better manage risk.
Taken together, this is a trading strategy. If you want to be successful, you can’t leave out any of these points.
So here are some top tips to help you build a strategy.
1 – Find out what works for you
The The financial market is very wide. And amid this vastness, there is something that could work for you well. So you should spend Many of Determine the time Main information about what suits you.
For example, you can start with Determine the financial asset Will you trade or invest? If you want to trade forex, you can choose to trade major currency pairs or two metals and exotic items.
On the other hand, if you choose stocks, you can choose companies with huge capital like Apple and Microsoft. Alternatively, you can go for small stocks.
Your trading style
Additionally, you can Find out what suits you In terms of trading or investing. Trading is the process of buying and selling financial assets within a short period while investing is a long-term approach. As such, you should focus on either of the two.
Moreover, in terms of strategy, you must decide which approach is right for you. For example, you can decide whether you want to be a speculator, a swing trader or a day trader.
Should spend large amount of Time to decide which strategy to use. Experts recommend spending several months figuring out what works best for you. The demo account will be absolutely necessary while you are doing this.
2- Keep it as simple as possible
Another important tip for designing a good trading strategy is Make it as simple as possible. It simply means that you should avoid complicating things.
A common area where many new traders fail is that they overcomplicate things. Since they don’t know where to start, beginners put more tools into the chart with this hope: getting better signals.
Focus on a few indicators
For example, h Focus on many things when performing their chart analysis. In most cases, you will find a beginner trader adding More than 5 technical indicators in the diagram as shown below.
This is a mistake. Instead, in everything you do, you must make sure of it Keep everything as simple as possible.
In this case, instead of using many indicators in the chart, you should instead focus on one or two indicators and master them. At DTTW™, we have seen many very successful traders who have mastered the use of technical indicators such as VWAP and moving averages.
Use chart patterns
Another way you can simplify your trading is Focus on chart patterns alone. Some of the most common patterns that you can use in trading are:
Focusing on these patterns will greatly simplify the way you trade and make you successful.
For example, the chart below shows that Apple stock has been in a downtrend and it is Below the 50-day moving average. Therefore, you can make a short trade as long as the price is below this moving average. Also focus on identifying support and resistance levels.
3 – Try different strategies
The next step to come up with a winning strategy is Try different strategies In the market. Fortunately, most online brokers provide a free demo account that anyone can use to create and test their strategies.
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The demo account is exactly the same as the real one. The only difference is that The account does not contain real money. Instead, it gives you access to all the data and tools in the market and lets you trade.
So, as we mentioned above, you should Spend at least three months In a demo account he tests different strategies and establishes the successful one. For our partners, for example, we have a TMS platform.
Sometimes, you will find that a file A particular strategy works in different market conditions And others don’t. Therefore, you should work hard to find an approach that works well.
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4 – Consult
Finally, we recommend that you consult with People who have worked in the commercial industry for a long time. Doing so will help you use their experience and apply it in your trading practice.
A good way to do it is Join an existing trade hall. This could be a large financial institution such as an investment bank or a small office with a few traders. Joining this trading floor will help you learn from their experience.
Related “ How to be a successful trader: from zero to champion
In this article, we have taken a look at the ideal process of being a good trader and some of the best strategies you can use to become a better trader.
We have also focused on the best process to follow when creating a good trading strategy when trading all types of assets.