Trading Strategies and Customized Strategies
Fifty Fifth session of Forex Training
Welcome to Forex professional training in financial markets.
In this session we will discuss in detail Trading Strategies and Customized Strategies.
Learning and practicing each of the Technical tools, mentioned in previous sessions, alongside studying of their applications and procedures are the prerequisites of creating a strategy.
After learning and studying all of the tools, trader can make a simple strategy which can be developed afterwards.
Trader can customise a simple strategy or he/she can utilized suitable developed strategies available on the internet and then personalize them for their own convenience.
Trading Strategy Types
Strategies can be classified into the following categories:
- Trend strategies: These strategies can be exploited on market trends. So traders should apply Oscillators, like CCI, as well as breaking patterns to develop a trend strategy.
- Range strategies: Mostly used in range markets in which price fluctuates in a horizontal channel.
- Reverse strategies: These strategies can be formed in reversal points and pivots. Those traders who desire to find reversal points at the end of a trend to place a Sell order at the end of uptrend or a Buy order at the end of a downtrend.
Customising Trading Strategies
Trader can customise or personalize a plain or a developed strategy based on his/her trading behaviour to fulfil the desired trading method.
If a trader wants to trade by a developed strategy which was designed by another trader, then he/she must follow trading behaviour and method of the developer otherwise he/she must personalize the developed strategy.
For example, a trader prefers to use the Stochastic pattern, while other person may use RSI to identify the reversal points on a trend.
On the other hand, there may be some strategies which trader cannot replace.
Trading Strategy Test
Trader can examine the planned strategy on a Demo account by placing several orders.
A strategy may have multiple conditions that can generate different confirmations and signals.
So trader can place orders based on signals from the strategy which can generate a signal with several confirmations.
The success coefficient of any strategy should be recorded after each utilization on an order.
For example, the ratio of success on a certain number of orders with specified amount of confirmations.
Traders should apply each strategy on 40 to 60 orders to consider the ratio of prosperity against failure to determine if the given strategy is suitable.
For example, after a certain strategy test, trader could derive the ratio of its successful orders;
The overall ratio of success over failure equals 70%.
- 1st condition ( Minimum confirmations) = 65%
- 2nd condition = 72%
- 3rd condition = 77%
- 4th condition ( Maximum confirmations) = 84%
The efficiency of the given strategy increased as there were more confirmations.
Trader can utilize some strategies concurrently to detect spots with more confirmations for higher rate of success over failure.
A sole strategy may give fewer signals, while using 2 or 3 strategies simultaneously would generate more signals with better confirmations.
Trader must never utilize strategies without Stop Loss indicator, since any strategy would generate false signals that may result in a “Margin Call”.
Those strategies with a longer Stop Loss price rather than Take Profit may be unprofitable, since every SL would equal to 5 or 6 TP prices.
Even a Strategy with an efficiency of 90% would be unprofitable if SL price is considerably higher than TP price.
Trader must never place an order without a strategy or signals and confirmations from applied strategy.
Those traders who do not place an order on the exact points confirmed by strategies would lose their capital eventually.
Trading Strategy Components
Each strategy provides the following issues:
- Suitable entry price
- Take Profit price
- Stop Loss price
- Close conditions of an order under special circumstances. Sometimes trader must close an order, which is proceeding toward SL price, despite previous confirmations.
- Multiple Confirmations on a spot as well as several conditions with different efficiency.
That concludes this session, until next time and another session take care.