Build Your Own Trading Strategy

• Building your own trading strategy saves time and money, and it is also enjoyable and easy.
• The first step in building your trading strategy is defining your trades, meaning: what kind of trader are you, what is your trading timeframe, and which assets will you trade?
• When building a trading strategy, it is best to see how the asset performed in the past by looking at historical data.
• Setting up a system for choosing entry and exit points, alongside other rules, can help the strategy succeed.
• Testing your trading strategy across a variety of indicators and different timeframes helps determine how and when the strategy performs, and the best ways to take profit and avoid losses.
• Do not try to rely on strategies that work 100% of the time, because that is impossible.

When and where you will apply your trading strategy

Before a successful trading strategy can be built, you need to define your chart choices. I mean the type of trading you will do: are you a day trader, a swing trader, an investor, a news trader, and so on? And will you trade your strategy on the one-minute timeframe, the four-hour timeframe, a daily strategy, or a monthly one, and so on? Just make sure to choose a timeframe that suits your trades.

Then you need to focus on the market you will trade in: stocks, options, futures, forex, or commodities, and so on? Once you have chosen the timeframe and the market, decide the type of trading you want to do.

For example, suppose you chose to trade stocks on a thirty-minute timeframe for day trading and you want to focus on stocks that move within a defined range. Here you can run a stock screener on your trading platform for stocks currently trading within a specific range that meet other requirements, such as a minimum volume and pricing criteria.

Of course, stocks move over time, so run new screens as needed to find stocks that fit your trading strategy once the earlier stocks stop trading in a way that matches your strategy.

Building and testing your trading strategy

Building a successful trading strategy makes it easier to stick to your trading plan, because the strategy is your own work.

So, as a trader, look at the highs and lows in prices to see whether anything influenced these moves. Indicators such as time, candlestick patterns, chart patterns, minor cycles, volume, and other models are assessed. Once you have found your trading strategy, it helps to go back and see whether it fits the other moves on the chart at earlier times.

And could you have made a profit over the past day, week, or month using this trading strategy? If you trade on a five-minute timeframe, keep looking only at five-minute timeframes, but look back in time and at other stocks that have similar criteria to see whether it would have worked there too.

After you have set a group of rules that would let you enter the market for a profit, look at those same examples and find out what your risk is. Determine what you will need as a stop in future trades to take profit without getting stopped out. Then analyze the price action after entry and see where you should place the take-profit point on your charts.

When you analyze the moves, look for profitable exit points, where the ideal exit point was, and which indicator or method could be used to capture most of these price moves.

When looking at take-profit and stop-loss points, use indicators, candlestick patterns, chart patterns, percentage retracements, trailing stops, Fibonacci levels, or other tactics to help take profit from the opportunities you see.

Track all the trading strategies you use in a specific template and combine them into a single trading plan. When conditions become unfavorable for a particular strategy, you can avoid making trades until the signals of your trading strategy as a whole line up. Only then can you put your trading strategy to use in the market.

Finally, keep in mind that you do not need to look for a trading strategy that works 100% of the time. In fact, if you do, you will most likely not find any workable strategies. Also look for a trading strategy that produces a net profit at the end of the day, week, or year, depending on your timeframe.

Also, at this stage your trading strategy will be simple, and you may be able to memorize the trading rules. Even so, you should still write down your trading rules for a while, because having a written trading plan is a strong way to ensure discipline and commitment. It also provides a record of your trading strategy, which you will find useful when you try to develop it further.

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Frequently asked questions

How do I learn trading from scratch?

If you want to learn forex trading from scratch, here are some steps you can follow:

1. Learn the basics of the forex market and its terminology, and how buying and selling work.
2. Learn the basics of technical, fundamental, wave, and psychological analysis of markets and assets.
3. Choose the strategy you want to follow, learn it well, and test it on a demo trading account.
4. Make sure to use technical trading tools such as indicators and charts to track prices and trends in the market.
5. Practice risk and money management, and learn how to place and manage orders.
6. Follow major market news and the economic and political changes that may affect the market.
7. Trade wisely, do not rush, and do not move into live trading before you have achieved enough success on the demo account.

You can also benefit from many articles, books, and training courses.

What is the best thing to trade?

This depends on the trader’s preferences and goals. But in general, a new trader should choose a reliable broker that can be trusted to keep funds secure and to provide the support needed for trading. They should also learn and practice the basics and gain more experience in technical and fundamental analysis and in risk and money management. Online training courses and available resources can help with gaining the necessary knowledge. It is also important to be patient, not to rush into decisions, and to test the strategy on a demo trading account before live trading.

How do you build a trading strategy?

To build a successful trading strategy, a trader should take the following steps:

1. Analyze goals and risk: define your trading goals and your ability to bear and manage risk.
2. Study the market and assets: look for the financial instruments that suit your view as a trader, and analyze charts thoroughly.
3. Set the timeframe: choose the timeframe you will trade on and stick to it.
4. Choose a trading strategy: pick the trading strategy that suits your trading style and your expected number of trades.
5. Money management: determine the number of trades, the income and loss ratio, and manage the financial risk related to those trades.
6. Test the strategy: test the strategy on a demo trading account before starting real trading.
7. Continuous learning: regularly review market news and developments, and update your strategy and trading charts.

Disclaimer: This article is for educational purposes only and is not investment advice or a recommendation to trade. Trading forex and CFDs carries a high level of risk because of leverage and can lead to the loss of all your invested capital, so you should never trade with money you cannot afford to lose. Past performance and any strategy described here do not guarantee future results, and no trading approach works all of the time. Do your own research and consider seeking advice from a licensed financial professional before making any trading decision. Some links on this site may be affiliate links, which means we may earn a commission at no additional cost to you.