Building forex trading strategy. Aspects and analysis.Barry Copeland 01 / March / 18 Visitors: 319
Building forex trading strategy. Aspects and analysis.
In the world there is a huge number of various trading algorithms (systems), but nevertheless, most traders seek to create their own system. Of course, if you create something from scratch, yourself (a), then you fully understand this, know and understand how it works and have the ability to correct, redo, understanding what exactly you are changing and for what. Perhaps it is for these reasons that people want to create their own trading system that will help them in understanding what exactly they are doing in the market at the moment.
How to create a strategy, what aspects should be considered?
1. Desire. In order to create something worthwhile, you need a desire to do it.
2. Definition of your psychotype. It is no secret that psychology plays an important role in trading, and in order to follow the system and not “break” itself, it is better to immediately determine which psychotype a trader should belong to and, based on this, continue working on the system.
What are the psychotypes of traders:
- Intelligent: Logically analyzes the situation and makes the simplest and most profitable decision, is capable of introspection.
- Intuitive: it can make the right decisions in the face of uncertainty, often can not justify them logically.
- Instinctive: mainly trades tested by experience, standard situations (patterns, patterns), often trades conservatively with stop loss.
3. The idea for a trading system: In order to create something, you need to imagine how it will look. Ideas include:
- Taming (time when and how much time a trader can devote to trading)
- Choice of timeframes (Which timeframes will be analyzed)
- The choice of methods and tools for analysis (What will the trader use when making decisions: Fundamental data, indicators, charts, various other tools)
4. The calculation of MM. If you take trade seriously, you need to draw up something similar to a business plan. Identify the risks for the transaction, for the entire deposit. Designate actions for losing trades (setting stop loss, averaging, locking, etc.). Decide how profitable transactions will be closed (by the amount of profit, by the value of the price, based on the ratio of stop / profit, etc.).
5. Test trading. When all of the above has been decided, you can begin to test trading. For tests, it is advisable to choose a demo account, or a small deposit, the loss of which will not bring you financial problems and suffering.
6. Analysis of the results. During and after test trading, you need to analyze transactions, the system as a whole. It is possible to analyze differently and many indicators, but I think the main ones will be the total profit of the system for the tested period of time and the drawdown of the deposit. If the results satisfy you, then you can go directly to the trade. If the result leaves much to be desired, then you should identify the weaknesses of the system and review the necessary parameters, and then return to the test.
Creating a trading algorithm (system) is not an easy task, but it can be fully paid off with the right approach, due perseverance and thorough work.