To be a successful trader, you need a strategy

Forex Trading Systems

A lack of trading strategy suggests a lack of preparation and one of the most common reasons traders fail is because they haven’t taken the time to consider a system that will work for them. Plunging headfirst into the unknown will often lead to lost trades, lost money and a trader giving up without ever having given trading a proper go. To break this cycle, all it takes is a bit of research and some time spent with a Demo account

Because each trader has different knowledge and motivation, the strategy used by one trader will be different to the next. The trick is finding one that works for you. There are hundreds of different approaches that can be used, from broad concepts to very specific technical analysis, but there are some general principles which can be applied to any Forex strategy.

A basic framework

By setting some parameters to work within and keep you on track, you’ll be in a much stronger position to build a successful trading account. The boundaries you build your framework within are up to you. It might be a general rule such as the level of leverage you use, or restricting yourself to trading only certain currency pairs. Or it could be based on technical analysis like trend lines, Fibonacci retracement, support and resistance lines, pivot points or scalping. Or it could be a combination of any, or all, of the above. Whatever you choose, you will benefit from having a clear direction.

Risk management

Whatever your strategy, you must select a level of risk appropriate to your situation. Some losses are an inevitability in trading, but if you factor potential losses into your overall strategy you’re far less likely to be blindsided and will be in a stronger position to mitigate them. Managing risk can be a case of mental preparation as much as financial considerations, so the responsible approach is to understand how each of these will affect your strategy.

Patience and psychology

You need to allow time for a strategy to work. Success in Forex trading tends to come from longevity, so winning or losing one trade will not make or break a strategy. If over time you do feel – or if it is proven – that your plan is flawed then of course it should be adapted, but, as much as possible, do that based on evidence and analysis rather than a gut feel. This comes back to the psychology of trading and not letting emotions cloud your judgement. For example, it’s easy to get carried away and overreach when you’re on the high of a few consecutive wins, or to withdraw after a few losses, but measuring your performance within the context of your overall strategy will give you a greater perspective.

Need help putting together a strategy? Use our Forex Education section to discover more about trading.

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