To become a profitable trader you must forget about random trading, you need to have and follow your forex strategy. Without a strategy and trading rules you are floating in the sea without a boat and if you have a strategy you are swimming in the same sea with a ship. It is a huge difference.
To build trading strategy you have to know many basics and advantages about trading forex. After that, you need to identify yourself, that you are prepared for scalping, day trading or swing trading. For this step, you need to make many trades (only in the demo trading account). And after that if you feel that you know what is comfortable for you, can decide what is the perfect trading style for your needs. For example, for me, the best choice is swing trading, that means I like to have about 1-2 trades per week, and I can keep these for days or even weeks. I have tried day trading for many times, but I think I’m not suitable for day trading because you have to spend a lot of time near a computer looking for opportunities and then monitoring your trade. You can understand what is best for you only with experience, of course, you have to have lots of, free time for swing trading if you don’t have I recommend part trading.
My recommendation is to build a trading strategy only with a demo account, believe me, it’s worth to listen to my suggestion because I started trading with real money, but because of this, I lost a lot of money.
So if you want to save your money and nerves, just keep building your trading strategy with a demo account.
What to know before creating the forex strategy.
So open a demo account and start experimenting. One more suggestion is to open a few demo accounts so you can research different strategies. Keep in mind you need more time and expecting to create a trading plan, so at the same time, try to study a few strategies with different accounts.
Thera are so many ways to create a plan. Let‘s look at some basics:
1. Trend trading
You can trade following the trend and using price action. Trading using this system in my opinion the best time frame to use at least one hour chart, four hourly and daily charts. To identify trends, you can use Simple moving average indicator with the 200-day shift.
Moving average 200-day shift is a blue line. If a price is above this line, then the trend is up, if price below the blue line, the trend is down.
The second thing to determine is price action, use higher high and higher low for uptrend and lower high and lower low for a down trend.
2. Resistance/support trading
I think its fundamental of basics. Just identify these levels and you can use it for bounce trading, that means selling at resistance and buying at support. Just keep in mind this is the first part of trading support/resistance, you need more confirmations to trade by levels.
3. Channel trading
This system is similar to point 3, just in above scenario resistance/support was horizontal, in this case, it is usually at 45 degrees levels. As I mentioned above, you need some more confirmations.
4. Breakout trading
It is a reverse of point 3, you wait for some resistance or support levels to be broken and then enter a trade. It’s important not to get caught in a fake breakout, sometimes price just makes news highs or lows and comes back.
All these points are just fundamentals of creating a trading forex strategy. Remember, while you are trading with some strategy just keep in mind that the same things are being seen by other market participants too. So you have to have some advantages in your strategy. You can explore and test it with your demo account.