In order for you to be successful in forex, or anything else for that matter, you should have a system that you’ll follow and be bound by.
Your forex trading system should include every action that you need to take, including but not limited to researching the market, confirming your indicators, position size, entry and exit points.
Now put this into your head:
A trading system is personal and only works for it’s developer.
That’s true so don’t expect me to give you my system, for the reason that it’s personal to me and that I know that it won’t work for you. That said, I will guide you and tell you what a successful trading system should have.
Every trading system in order to be successful should include:
- Money Management
- Macroeconomics
- Market Sentiment
- Specific pairs to trade
- Technicals
- Specific entry and exit points
1. Money Management -
This is the core of your trading system. It’s already explained in money management so head over there and see what it is about.
2. Macroeconomics -
Preparing to trade forex is more than just reading charts and currency numbers. Before anything, you need to stay up to date with overall global economy. Understand the conditions around the world and the main driving factors. You have to notice things that are going on, like if there is a war, what are oil prices, when are holiday seasons, is there a large scale disease, natural disasters and anything else that can effect the global economy. This also includes any big meetings going on, like G8 summit, Annual UN meeting etc. Get an understanding if people are optimistic or pessimistic.
3. Market Sentiment -
After getting a feel of overall global economy you should get little dipper into forex market. Find out more about forex specific happenings; understand the driving forces of forex market itself. You do this by checking fundamentals and being aware when they are scheduled for release.
4. Pairs to trade -
As I said it before you should pick few pairs to trade and concentrate all your research around those. But as a part of a system (repetitive without guessing) you have to be more specific during your trading. After checking macroeconomics and forex market sentiment you should have an idea of what pairs will be more tradable during your specific trading period be it day/week/month, so go ahead and pick those pairs.
5. Technicals -
Since you’ve decide what pairs to trade based on fundamentals, it’s time to jump on your trading platform and start analyzing your technicals. Check the charts, support and resistance, moving averages etc. and determine the trends and your basic entry points.
6. Determine specific entry and exit points -
This is your last step. Dig dipper into your charts and using all the data on the previous steps determine your specific entry points. And before executing the trade, also determine your exit points; this way you won’t leave yourself any options to be anxious, greedy, or in other words emotionally attached to your position.
Now work your magic and start putting together your trading strategy. Note that it’s essential that you’re strategy includes specific details from each of the six above points.
