Developing a Trading Strategy

Trading with a plan versus trading without one can mean the difference between making money and losing money.

A trading plan is a methodical technique to implementing a trading system that you've established based on your market analysis and outlook, as well as risk management and personal psychology.

It doesn't matter how good your trading strategy is if you don't stick to it.

Traders that maintain a disciplined approach to their trading are the ones who succeed year after year.

Because they adopt a disciplined method, they can even have more lost transactions than winning deals and still be profitable.

Here's a rundown of the main advantages:

It is easier to trade with a plan than it is without one.

Stress reduction leads to improved health.

• Ability to assess your own performance, recognize issues, and make adjustments.

• Many psychological concerns can be avoided with the use of a trading plan.

• The amount of bad deals will be reduced if a trading plan is rigorously followed.

• In the heat of the moment, a trading plan might help you avoid impulsive action.

• A trading strategy allows you to manage the only thing you have control over: yourself.

• A trading plan will help you to be more disciplined in your trading. Both discipline and a trading strategy are lacking in gamblers.

• You'll be able to trade outside your comfort zone if you have a plan.

• How many times have you let a loss continue instead of cutting a profit because it was more convenient？ This can be avoided with the implementation of a well-thought-out plan.

• A strategy is your GPS for getting from where you are now to where you want to be: constant profitability.

• Your trading strategy is set up in such a way that if you make a “wrong turn,” you'll notice it quickly and be able to remedy the situation before losses spiral out of hand.

Before you go for your next lesson, one final item...

Always keep in mind that your trading strategy is a work in progress.

The commercial climate is constantly changing.

It is dynamic and ever-changing. As circumstances change, so must your trading strategy.

Examine your trading strategy and procedures on a regular basis, especially if your financial or personal circumstances change.

Also, if your research leads to changes in your trading system or approaches, make sure your forex trading plan reflects those changes.

Adapt and you will live.

Remember, the main objective of the trading strategy is to keep you on track and to help you make excellent trading selections by operating in an effective and efficient manner.

It is, however, only as good as you make it, and if it is not put into practice, it is absolutely useless.