If you intend to pursue a career in Forex Trading, you are required to operate based on a strategy. It is a fundamental tool, the only one capable of distinguishing between improvised trading activity, potentially leading to financial disaster, and conscious and effective trading activity.

The term "Forex trading strategy" refers to the set of elements that define the investment activity in its entirety, taking into consideration all points of the "supply chain": from objectives to reference assets, from analysis to risk containment and management techniques, and so on. A misconception that many fall into is considering the Forex Trading strategy as if it were a one-size-fits-all garment. If one or more traders have made profits with a given strategy, it means that strategy is valid for everyone and all occasions. Unfortunately, this is not true at all. The strategy must fit the trader, not vice versa. Consequently, each trader must develop their own. Of course, it is possible to refer to those of others, but some adaptation work is always necessary. So, how do you create a good Forex Trading strategy? The topic is incredibly vast, occupying entire manuals and video courses. In this article, however, we can mention the three phases that allow you to develop a good strategy.

Phase 1: General Objectives

Obviously, it's not about setting objectives precisely, perhaps quantifying them. In this phase, which is preliminary in the most absolute sense, you should think more about "intentions." When going through this phase, it is necessary to ask yourself the following questions:

• "Do I intend to trade part-time or full-time?"
• "How much capital do I intend to invest?"
• "How much time do I want to dedicate to training?"

If you answer these questions, you will be able to define, at a minimum, the framework within which you will subsequently develop your trading strategy. This is quite evident because any strategic approach, regardless of the activity, depends on:

• The time you want to dedicate
• The resources you want to employ
• The degree of preparation you consider necessary to achieve the results

If you are a beginner, the advice is to use a very soft approach, at least initially, and above all, be prudent. Therefore, opt for a moderate part-time, start with small amounts of capital (that you can afford to lose). Above all, dedicate a lot of time to studying.

Phase 2: The Basic Idea

Here the game gets tougher, the design work more complicated. This phase can be defined as the one functional to the identification of specific, operational, particular objectives. During this phase, you will have to decide which asset to focus on, which types of analysis to prefer. Obviously, fundamental analysis and technical analysis must go hand in hand, but one may be more represented than the other, and this is still a strategic element. The advice is to dedicate a lot of time to this phase, also because the next one, which is the most difficult of all, depends on it.

Phase 3: The Draft

This is the phase of drafting the actual Forex Trading strategy. Once the general and particular objectives have been identified, we move on to defining the elements that make up the strategy, the indications you will have to follow during your trading activity. Without going into too much detail, we can list the elements that will need to be explored when defining the scheme/draft.

• Money management, i.e., the indications that allow you to keep capital employment under control, both in the best and worst-case scenarios.
• Methods for identifying entry signals.
• Methods for identifying exit signals.
• Identification of technical analysis indicators (in this case, there is only an embarrassment of choice)
• Study program and interpretation of the economic calendar, i.e., the identification of the market movers to follow and the information platforms from which to obtain interpretations, analyses, and estimates;
• Emergency resolution technique, because - in Forex Trading, it often happens - your predictions may clash with reality.

Obviously, this is only a part of the work that needs to be done in this phase, but still the most important. After all, the strategy is a complex object, which in any case escapes attempts at decoding. In essence, nothing prevents you from adding other elements (as long as they are functional to a profit perspective).

Phase 4: The Test

Even assuming that you have gone through these phases with extreme diligence and have dedicated the necessary time to each one, you would be halfway through the journey. This is certainly not the most difficult phase, but it is the decisive one. That is, the phase that allows you to understand if the strategy can work or not. Every tool, and the strategy is in all respects a tool, must pass the road test. Now, "strict" road tests in Forex Trading are very dangerous. Wanting to try a new path, you risk playing with your capital. Fortunately, there are tools that allow you to produce tests without putting anything at risk. The options - which are not alternatives but complementary - are two. Demo Account. Demos serve beginners to get their feet wet and experience the thrill of the market. However, they can be used to test strategies. The mechanism is the same: the market is real, the money is not. Back Test. This type of test is very interesting, although made available by a limited number of brokers. In essence, the trader downloads a past market setup and tests the strategy on it. It's like going back in time and verifying the effectiveness of a tool. The basic principle is that if a strategy has worked in the past, it has a good chance of working in the present (and future) as well.