Everyone thinks developing a well-balanced trading strategy is a very tough task. But if you do the research, you will notice the professional traders are always using a simple strategy. They never believe in a complicated approach as it makes things a lot harder. By having a fair knowledge about the support and resistance level, you can expect to trade like a pro. But of course, you need a well-balanced trading strategy to survive as a retail Forex trader.
There are few steps you need to follow to create a perfect strategy. These are –
- Understanding the market basics
- Identify the support and resistance
- Learning about the price action signals
- Improving your risk management skills
Understanding the Market Basics
To create a robust strategy, you need to have an in-depth understanding of the market details. Never think you can become a successful trader without knowing the technical, fundamental, and sentimental analysis. These three things are very crucial as it gives you an overall idea about the market conditions. Things might be challenging but if you learn these things in the demo account, it is just a matter of time you become skilled in understanding the basic parameters. You can also seek help from professional mentors as they can give you the proper guidance and help you in the strategy development process.
Identifying the Support and Resistance
Support is such a place in the market where the asset gains bullish momentum. On the contrary, resistance is a critical place where the sellers get aggressive and push the asset price lower. You need to know the proper way to draw the support and resistance level in the higher time frame. If you draw the support and resistance level in the lower time frame, it will be a big problem since you will be taking the trades at the minor support and resistance.
Use the demo account to develop your skills so that you can find the perfect support and resistance level with a high level of accuracy. Once you become skilled at analyzing the critical support and resistance, use the real fx trading account to execute the trades.
Learning About the Price Action Signals
You don’t have to master complicated trading strategies or learn the use of complex indicators. To make a consistent profit, you need to rely on simple logic. Try to find the reliable trade signals in the higher time frame based on the Japanese candlestick patterns. As you learn to identify the reliable candlestick pattern, you will slowly develop the ability to take the trades without any confusion. Evaluate the candlestick data in the 4 hours or the daily chart. This will protect your trading capital from the false signals generated in the lower time frame.
Improving Your Risk Management Skills
Money management is one of the most important elements of your trading strategy. You may think, you know everything about this market. But this is not as easy as it seems. To make a consistent profit, you need to develop a unique strategy that will allow you to deal with the losing trades without having any major problems.
Look at the long-term goals. Find the trade signals with a 1:4 risk to reward ratio. This should allow you to accept few losing trades. But developing a trading strategy that focuses on the high risk to reward ratio is a very tough task. You have to evaluate the technical and fundamental data at the same time. Find the trade signals favoring the major trend as it will reduce the risk exposure and allow you to trade confidently.
Successful traders know a lot about the market. Still, they are learning new things to keep pace with the changes of this market. You need to follow the same process and only then you can expect to become a profitable trader in a short time. And always have faith in your trading strategy.