Is your Forex Strategy Safe?
The title of this article has actually been answered if it turns out you already have experience in the world of forex trading, whether it’s good or bad experience. This is simply to answer the question of your Safe Forex Strategy? : if you suffer a lot of losses until your capital is depleted, that means your trading strategy is not safe. But if it turns out your capital is experiencing consistent growth, it means that your strategy (at least until now) can be said to be relatively safe.
But don’t be happy first. Even though your capital is experiencing growth, it still has to be seen how long you have been carrying out this strategy. If it is only a few months, it cannot be assessed whether the strategy is really safe or not. Believe it or not, there is a kind of “trust” among traders that there is a name “ beginner ‘s luck “, that is, when a beginner trader can collect profit-profit in the first few months of trading. After that? Finished
Just like this, regardless of whether you are always losing or still gain profits, just check whether these two key points already exist in your trading strategy.
Key Points # 1: Strategy Has Been Tested By Time
Make sure the strategy you use is a trading strategy that has been tested by time. What do you mean?
We cannot give an assessment of a trading strategy (or often also called a trading system) only from a few transactions or just two or three months of trial. That’s because the market is very dynamic and its behavior can change quickly.
Test first the strategies you will use. For this purpose, there are at least two stages that must be passed.
The first stage is backtesting, which is to do a trading simulation using price movements in the past ( historical price ). In this way, you will be able to test the accuracy of a particular trading strategy as if you were in that period, because you will see the price chart move up and down according to the moment.
In backtesting, you should use as much historical price data as possible. I used to use data for three years.
Phase 2 is forward testing , where you will test the strategy in real time , aka the real market. As a first step forward testing , you can use a demo account , but make sure you do this trading simulation according to the rule . The point is to do this simulation just like you are trading with a real account. This forward testing stage should be done if the backtesting results have shown good results. Forward this testing for at least three consecutive months.
The third stage is forward testing with a real account. Do it for at least two months.
If you succeed through the whole series of testing with positive results, then your strategy is already feasible.
Key Points # 2: Strategies to Have a Clear and Detailed Trading Plan
Trading plan organizes do ‘s & don’ts in your trading. This means regulating what you have to do and managing what you cannot do.
What must be in the trading plan include money management , while money management is closely related to risk management. Of course there must also be a strategy that you will apply. Examples are as follows:
|Maximum risk||:||50% of capital ($ 5,000)|
|Risk per transaction||:||5% of the maximum risk|
|Risk-to-reward ratio (RRR)||:||1: 1|
|Trading system||:||Fibonacci Retracement + Stochastic + CCI, time-frame H1|
|Entry||:||Wait for correction to 38.2-61.8 area, look for a signal on stochastic + CCI|
|Exit||:||Stop Loss (SL) in the area of 61.8-76.4 Fibonacci Retracement (cut loss) Take Profit (TP) in the area of 23.6-0.0 Fibonacci Retracement (adjust the risk per transaction 5% and RRR)|
With a detailed trading plan like the example above, every decision you take will have a clear basis and direction. You will know exactly how much risk you will face, also know what to do if it turns out the risk comes up.
Well, that’s two key points that must be in your trading strategy. If you don’t have one, it is likely that the strategy that you have run so far is not as safe as you think.