Wednesday, October 18, 2017

How You Define a Strategy That Really Works

April 6, 2015 by  
Filed under Forex FAQ & Latest Post


In today forex faq, we have a question from one of our fellow traders who are new to trading.

Below is his question:

Hi, As a beginner I have gained the basic knowledge of forex but i’m still looking for a trading strategy that could really work. Could you please suggest one strategy that I should stick to meanwhile I learn more and more about currency market. Will be waiting for the answer.

Regards,

I believe that the above is also one question that a lot of new traders are asking as well. Before I start to talk about the strategy, let me tell you a few things you have to know about strategy that really works.

What is considered Strategy That Really Works

For most new traders, they have their own perspective of strategy that really works. Most of them think that a strategy that really works is one that wins 100% of the time. In fact, I used to think in the same way as well. Eventually I realized that what I want is a strategy that makes money every month and not one that wins 100% of the time.

This is because there is no strategy that can win 100% of the time. The key in trading lies in the risk reward of your strategy. You just need a strategy that has a winning percentage of 70% with at least risk reward of 1:2 and you can be making a decent income from trading forever.

once very good example that you can see is my Break The Bands Strategy, you can take a look at my performance report and you will see that this strategy does allow produce losing trades as well.

However I am able to make profits every single month without fail for years. I have published the report since 2012 and you can see that it is profitable for me every single month irregardless of the market condition.

I have done the below calculation several times before in this blog.

If your strategy gives you 10 trades per month and it produces 5 winning trades and 5 losing trades.

Assuming that you risk $200 per trade and your strategy has a risk reward of 1:2

Profits = 5 x $400 = $2,000
Loss = 5 x $200 = $1,000

Total Profit = $1,000

Can you imagine that you are still making $1,000 when your strategy loses half of the total trade and this is the power of risk reward.

If your strategy has a winning percentage of 70%, you will be making more money.

So let me go into the strategy now

My suggestion for you is to go for strategy that rides the trend. For a new trader, it is very hard for you to trade against the trade. Moreover, when you trade in the direction of the trend, you will find that your strategy can achieve higher risk reward ratio.

Therefore if you are in search for a strategy, I will strongly recommend you to learn one that teaches you how to ride the trend.

No matter which strategy you eventually decided to learn, there is one thing that you must remember. You have to always practice what you have learned on a demo account until you are able to produce consecutive months of profitable trading with that strategy.

No matter how good a strategy is, without practicing it, you will not be able to execute it exactly the way you are taught. Being unable to execute a strategy perfectly, you will find it very hard to make money from trading. It is not because the strategy dun work, it is because you did not execute it well.

I hope that I have answered your question and do let me know if you have any problem.

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