Forex strategy from Mike Portman

There is no perfect forex system or strategy that will allow you to have winning trades all the time. There is no forex "Holy Grail". You will need talent, common sense, the right tools and patience if you want to succeed in this market. But you'll also need to be aware of the external factors and movements so you can adapt quickly. With the right tools and experience, you'll be able to recognize the best trades and avoid the bad ones. Nevertheless, you will always have wins and losses. The difference is that you'll learn how to cut your losses short and let your profits ride.

Here are the four main pillars that should help you develop your forex trading strategy:

1 - Approach

If you're a beginner, you need to acknowledge that you need time to learn. Time and hard work. It's the only way to succeed in forex. You should first identify your personal goals and your own personality. You can only dream about trading forex successfully if you have a strategy that fits your own personality. This will also allow you to understand your limitations and your strengths.

2 - Determining the three basic components of the strategy

Time frame - When trading forex, you may have a preferred time frame or use different time frames at the same time to enhance your entry and exit signals. Nevertheless, you need to know if you prefer shorter time frames or longer ones. They both have advantages and disadvantages. What really counts here is your own personality. Whether you prefer to trade using a 5 minutes time frame, where all ticks count, or if you prefer trading in a loss stressful way, by using daily charts, or even weekly or monthly.

Time you have to trade - This is extremely important since it will have a high impact on your trading. If you have a full time job, family, friends and a social life, you will have less available time that a student or a retired person, for example. You need to decide whether you can be sit in front of your computer for a couple hours a day (or more) or if you prefer to use the weekends to learn and research for possible trades on the following week.

Methodology - This, again, depends on you. You can base your trades just on price action, you can use one or more indicators such as the MACD or RSI, or you may find it more useful if you use technical analysis in conjunction with fundamental analysis. No matter which one you choose, make sure you test it deeply. Just don't get influenced solely on the number of wins and number of losses. Your wins number may be a lot higher but the amount you win per trade may be extremely low and not compensate for the losses. Make sure you get a ratio of at least 2:1, meaning that one average loss is half of one average profit.

3 - Developing the right mindset

Patience - You need to develop the patience skill in order to succeed Write your detailed trading plan and follow it. If you were supposed to enter in a trade at a certain price but the currency pair never reached there, move on to the next trade. This is why you wrote the plan and tested your strategy deeply.

Discipline - Whenever you forex strategy gives you an entry signal, follow it. There is no place for second guesses. Act rationally, just like when you wrote you trading plan. Don't forget to use the stop loss or trailing stop as well.

Emotional detachment - By strictly following your trading plan, you'll be able to be emotional detached.

Realistic expectations - Your goals should be realistic. You shouldn't expect to double your trading account in a short period of time, as well as you shouldn't wait for investing $300 in a trade and make $1,000.

4 - Risk management

No system is 100% accurate; you will always have wins and losses. The secret is in risk control, which can be made by using a proper risk management strategy. Your main goal should be to protect your trading account. After this, you should adopt a risk management strategy that fits both your own personality as well as the strategy you're using.

About the Author / Bio:

Mike Portman is a veteran trader. He trades stocks, options and forex, and he's a co-founder of ProfitFeed.net.