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Best forex strategy for daily chart template
Your trading plan is part of this necessary preparation. The objectivity and clarity that a solid trading plan provides is essential in a market that requires split second decision making to take advantage of opportunities. It will empower you to trade objectively with confidence and less emotional involvement. It should be read every day before any trades are placed. When developing or testing a new strategy you should backtest trades over different volatility.
Pick several days with tight ranges as well as several with strong trends. After you have confirmed you have something worth putting more effort into you need to sim trade the strategy. Trading Plan Outline Step 1 — Premarket Routine Develop a routine every morning that you follow to build discipline and consistency. It will prepare you and put you in the right frame of mind for the day ahead.
Trading requires great discipline and consistency, having a detailed morning routine will help you with this. Step 2 — The Vow You need to write a simple yet serious vow to follow your trade plan and never break it. Do this in your own words. My Vow: I vow to follow every rule in my trade plan for the sake of my family and my future. Step 3 — Goals Define what you want trading to provide for you and why you are willing to work relentlessly for it.
Start by reading this post on auction market theory. Examples: Consistency is the key to long-term success 4 basic outcomes: big winner, little winner, little loser, and big loser. Eliminate big losers for success. There will always be another trade. Taking trades outside of my trade plan will destroy me. Sometimes they work which is one of the worst things. Put as much detail into this section as you can including any macro components you may look at. An example is maybe your system works best in a range bound market so you avoid strong trending days.
Step 7 — Trade Management Learning how to manage a trade can be just as difficult as when to get in a trade. Having a precise set of rules you follow once in a trade is essential. Again, you want to have a plan while you still have objectivity. Once you enter a position you will lose some of your objectivity. Define precisely when you will take profit and where your stop will be.
I personally have several take profit strategies I use. It varies based on what order flow in a given market is telling me. Close half of position at first resistance level. Trail stop on remainder of position. Step 8 — Risk Management Money management is a key component to a successful trade plan and typically one of the rules that is broken by new traders. Losing trades are inevitable. Your money management needs to define not only what you will risk per trade but also what you will do in the event of a large drawdown.
The question is whether or not you will learn from those mistakes or just keep paying over and over again to experience them. Some people are more aggressive than others and you will eventually find out what kind of trader you are. Exits For exits, you have a few different options. Another way to exit is to have a set target, and exit when the price hits that target. How you calculate your target is up to you. For example, some traders choose support and resistance levels as their targets.
In the chart below, the exit is set at a specific price which is near the bottom of the descending channel. Others just choose to go for the same amount of pips fixed risk on every trade. However you decide to calculate your target, just make sure you stick with it.
Never exit early no matter what happens. Stick to your trading system! After all, YOU developed it! One more way you can exit is to have a set of criteria that, when met, would signal you to exit. For example, you could make it a rule that if your indicators happen to reverse to a certain level, you would then exit out of the trade.
This is the most important step in creating your trading system. Discipline is one of the most important characteristics a trader must have, so you must always remember to stick to your system! How to Test Your Forex Trading System The fastest way to test your system is to find a charting software package where you can go back in time and move the chart forward one candle at a time.
When you move your chart forward one candle at a time, you can follow your trading system rules and take your trades accordingly. Record your wins, losses, average win, and average loss. If you are happy with your results then you can go on to the next stage of testing: trading live on a demo account. Trade your new system live on a demo account for at least two months. This will give you a feel for how you can trade your system when the market is moving.
After two months of trading live on a demo account, you will see if your system can truly stand its ground in the market. If you are still getting good results, then you can choose to trade your system live on a REAL account. At this point, you should feel very confident with your forex trading system and feel comfortable taking trades with no hesitation.
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The trading entry signals tend to be much more reliable as well. Much more significant profit potential. The stop loss SL would tend to have a considerable distance based on the daily chart. Does that mean your risk is enormous?
Your trading risk should be set with an eye towards a percentage of your forex trading capital. In Forex, we have many variations of market lot sizes we can trade, so while the protective stop in pips may be significant, it can still be a tiny percentage of your risk capital. Forex Indicators: stochastic indicator required with default setting 5,3,3 Fibonacci: Retracement tool Candlesticks : Knowledge of reversal candlesticks Did you know that a daily chart trading system has a lot more advantages than trading in much smaller timeframes?
The trading signals tend to be much more reliable as well. Much bigger profit potential. The stop loss would tend to have a large distance because it is based off the daily chart. Does that mean you risk is huge? Your risk should be set with an eye towards a percentage of your trading capital.
In Forex, we have many variations of lot sizes we can trade so while the protective stop in pips may be large, it can still be a small percentage of your risk capital. It will repeat this over and over again.
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