Forex Trading Strategy

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Forex Trading Strategy

• The Forex Secret

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What is a Forex Trading Strategy?

• A forex trading strategy is a technique used by a
  forex trader to determine whether to buy or sell
  a currency pair at any given time.
• Forex trading strategies can be based on
  technical analysis, or fundamental, news-based
  events.
• The traders currency trading strategy is usually
  made up of trading signals that trigger buy or
  sell decisions.
• Forex trading strategies are available on the
  internet or may be developed by traders
  themselves.

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Basics of a Forex Trading Strategy

• Forex trading strategies can be either manual or
  automated methods for generating trading signals.
• Manual systems involve a trader sitting in front
  of a computer screen, looking for trading signals
  and interpreting whether to buy or sell.
• Automated systems involve a trader developing an
  algorithm that finds trading signals and executes
  trades on its own.
• The latter systems take human emotion out of the
  equation and may improve performance.

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Creating a Forex Trading Strategy

• Many forex traders start with a simple trading
  strategy. For example, they may notice that a
  specific currency pair tends to rebound from a
  particular support or resistance level.
• They may then decide to add other elements that
  improve the accuracy of these trading signals
  over time.

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Creating a Forex Trading Strategy

• There are several different components to an
  effective forex trading strategy

• Selecting the Market

• Entry Points

• Traders must develop rules governing when to
  enter a long or short position in a given
  currency pair.

• Traders must determine what currency pairs they
  trade and become experts at reading those
  currency pairs.

• Position Sizing

• Exit Points

• Traders must determine how large each position is
  to control for the amount of risk taken in each
  individual trade.

• Traders must develop rules telling them when to
  exit a long or short position, as well as when to
  get out of a losing position.

Trading Tactics
Traders should have set rules for how to buy and
sell currency pairs, including selecting the
right execution technologies.
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When Is It Time to Change Strategies?

• A forex trading strategy works really well when
  traders follow the rules. But just like anything
  else,
• one particular strategy may not always be a
  one-size-fits-all approach,
• so what works today may not necessarily work
  tomorrow.
• If a strategy isn't proving to be profitable and
  isn't producing the desired results,

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Traders may consider the following before
changing a game plan 

1. Matching risk management with trading style If
   the risk vs. reward ratio isn't suitable, it may
   be cause to change strategies.
2. Market conditions evolve A trading strategy may
   depend on specific market trends, so if those
   change, a particular strategy may become
   obsolete. That could signal the need to make
   tweaks or modifications.
3. Comprehension If a trader doesn't quite
   understand the strategy, there's a good chance it
   won't work. If a problem comes up or a trader
   doesn't know the rules, the effectiveness of the
   strategy is lost.  

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