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Five Important Steps of Forex Trading Strategy

These Five Important Steps of Forex Trading Strategy will make your forex career longer and stronger and more lucrative.

As a Retail Trader, you only have two choices:

  • No 1. Systematically follow a well-written trading plan with discipline. “If you fail to plan, you plan to fail”
  • No 2. FAIL.

Five Important Steps of Forex Trading Strategy:

STEP 1: DEFINE YOUR TRADING STYLE :

a. Are you an Intraday Trader, a Swing trader or a Position trader? A Swing Trader; Trades carried over to 5-20 trading days.

b. How often do you visit your trading charts? Twice a day:

  • To analyze the Daily session/close every trading day.
  • To analyze a 4-Hour session/candle close (After a major FX news)

c. If you consider multiple time frames for your analysis, which is your main time frame for your trade entries and exits?

Analysis: Monthly, Weekly, Daily, 4-Hour charts. Trade Entries and Exits: Daily and 4-Hour charts.

Five Important Steps of Forex Trading Strategy:

STEP 2: WHICH INDICATORS IDENTIFY A NEW TREND?

a. Which technical or fundamental indicator warns you of a trend reversal in advance?

Elliott Wave Analysis – The Advanced Market-Timing techncial tool.

STEP 3: DEFINE THE INDICATORS WHICH CONFIRM THE TREND REVERSAL?

To avoid whipsaws or “false” trends, which indicators confirm the price reversal?

Price Action and Volumes are two real-time technical indicators which validate the Elliott Wave Analysis.

STEP 4: MANAGING YOUR RISK:

  • Where will you place your STOP-LOSS? BUY order: Just below the recent price swing’s low. SELL order: Just above the recent price swing’s high.
  • How will you manage the position size on each trade? Do not risk more than 2-3% of total capital/account size per trade. Trade over a portfolio of minimum 5-10 Forex pairs at all times.

Five Important Steps of Forex Trading Strategy:

STEP 5: DEFINE TRADE ENTRIES AND EXITS:

a. Where will you enter and exit to make the most out of your trade? In a LONG Trade: Entry

  • (Aggressive Entry):

b. Above Price Action Reversal pattern’s price HIGH Entry.

  • (Reversed Entry):

c. Above price HIGH of first price swing or retracement.

  • Exit 1: Once a Price Action reversal occurs against the direction of the trade.
  • Exit 2: Once the targeted Elliott Wave nears its completion.

Summery: How to set your Forex trading strategies?

  • Choose a Forex Pair, set up Candlestick charts and add Volume indicators to your chart.
  • Starting from Monthly chart, perform Elliott Wave Analysis covering price data up to 4-Hour charts.
  • Identify a possible future trend using Wave Analysis on Daily or 4-H charts to capitalize on the next major trend reversal.
  • Once Price Action and Volumes confirm the trend reversal and the start of new wave/price move, take a trade in the direction of new trend.
  • Place your initial STOP-LOSS just above or below the recent swing high or low on a BUY and SELL trades respectively. Look for further confirmations to enter a new position if initial STOP-LOSS gets hit.
  • Finally, exit your trade upon a wave completion or when signalled by Price Action and High Volumes.

Happy Trading

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