The Trading-Plan (Strategy)
If we get into trading Forex, then we can simply at random or buy and sell currency pairs and hope that the value developed in our direction. If we do this, but only one thing is really sure. It will sooner or later, sooner rather, give a nasty crash and we will lose our deposit. For this reason we develop, befor we start, a trading plan.
How do i develop my personal trading plan? In principle, it is actually pretty easy to develop your own trading plan. First should I consider for a currency pair, preferably one of the majors. These have the advantage that they are traded on the market in high volume, thus resulting to a more market movements and on the other hand, the spread, which is the fee that is paid to the broker, is low.
Now I have to decide which indicators I want to use to make decisions. To find this out for us, we should note one important rule: The assembly of the indicators of our trading plan we make with a free demo account. It should however be noted that realistiche trading conditions apply.
When it comes, for which indicators we choose, we can recommend three of the most frequently used indicators. The first is the moving average. This should be placed in 2 different settings behind the candlestick chart, for example, with a 10 and a 20 period. The change in trend is seen when the faster the slower rising or falling crosses.
The first confirmation of a trend change signaled by the MA, we can take the stochastic indicator to. With this we see that the currency pair is currently overbought or oversold or whether the trend is moving in the opposite direction. It is overbought if the line is at 80 points or above and oversold if the line show 20 points or less.
As a second confirmation, we can use the Realiv Strengh Index (RSI).
The precise statements of the indicator values ??can be found in our article on the indicators.
To obtain an effective statement of the indicators we need to define a period in which are the values ??displayed. This may be starting from a minute to a day or even a week. The longer the portion is, the more reliable is the statement of a trend. Assuming that we are talking about daytrading, so the opening and closing of trade within a day, then a 30 minute time frame will be a good choice. Ultimately, you need the test of their trading plan to find out in what time frame you feel most comfortable and best picks your trading plan.
When we test our trading plan, it is of paramount importance that we open a trade only if all three indicators confirm a trend or trend reversal.
If we now have a possible trading opportunity, we should at the opening have a fixed value at which we close the trade both in the event of a win, and in the case of loss. This could e.g. loss at 25 pips and 50 pips profit to be the case. Help when setting the values ??provides a trading calculator that almost all brokers is available on the homepage. The specified values ??are entered in the options Stop / Loss (S / L) and Take Profit (TP).
Well, if we can start testing our trading plan, we are missing only one thing. To understand how effective our strategy really is, we should create a trading diary. In this we note for each trade the opening price and the values ??of the indicators. Then there are the values ??of the closing price and the reason of closing. Based on the values, in our diary, we can refine our trading plan and over time develop into a routine with which we act.