It is required to have a trading rule to stay profitable, yet there is no rule that can win 100%.
Afterall, we have to keep trading with a rule that’s profittable. Here is the steps I practice to create my won rule.
- 1 ①Understand the basis( Basic Forex information)
- 2 ②Choose your trading style
- 3 ③Create an trading rule (Trial)
- 4 ④Test with history chart
- 5 ⑤Is there a chance to win？
- 6 ⑥Improve trading rules(repeat ④～⑥)
①Understand the basis( Basic Forex information)
I think we have to understand “What is Forex?” first of all.
■How to usea chart
Understand basis such as currency pair, time frames, and how to make an order.
Candlestick charts are a technical tool that packs data for multiple time frames into single price bars. It is very useful to understand the price movement.
There are 2 methods used to analyze forex, technical and fudamental. Fundamental analysis is based on external events and influences. It helps understand price movement.
■Understand Dow theory
This is MUST STUDY！！！
It helpes us understand charts better and is also useful to create your own rule with other indicators
②Choose your trading style
Find your favorite trading method that fit your lifestyle
With only a brief holding time in an attempt to make a series of quick yet small profits. It requires us to trade speedy and focus while trading. However we don’t need to keep watching charts all day everyday.
As closing the trade before the day is over using minutes charts or hour charts, we can sleep peacefully at night.
While holding positions for days and weeks, we would not get affected by a movement happening in seconds and minutes.
③Create an trading rule (Trial)
Pick one time frame to trade. (Do not go back and forth on different time frames to make decisions)
Pick one or two indicators (or none)
Do not use too many indicators, but just pick one or two. It is not required to use an indicators if we dont need. (I only use one indicators to alert a price line)
Make a simple trading rule
Example: ：Sell when Dark Cloud Cover in Bearish chart….
④Test with history chart
⑤Is there a chance to win？
Using probability of bankruptcy, by Balsara, check to see the trading rule you created is profittable.
example〕Win rate 60％ with proft/loss ratio １⇒probability of bankruptcy 1.7％…..IMPROVE!
⑥Improve trading rules(repeat ④～⑥)
Improve trading rules and keep testing with history chart, upgrade win rate and proft/loss rate!
If my English is a little off please tell me how to say things more naturally or If you want to ask me anything , leave a comment below.
I would love your opinion or different analysis.:)