Each novice trader must develop his or her own trading strategy, which will be based on well-defined algorithms, rules, tactics and strategies, before starting to conduct currency operations in the Forex market. For a long time now, the importance of forex trading strategy is not a secret, so we will not describe that the prospects of a trader directly depends on the effectiveness of the strategy. All this theory, and about the advantages and advantages of a trading strategy can be written for hours, but how to develop it correctly, what exactly to include in the construction, few people know, especially beginners. So, in this article we will describe the main points that must be taken as a basis for building a trading strategy, as well as clarify how to test its effectiveness, because, most likely, from the first time you should not hope that the developed strategy will bring the planned profit. In order to be sure to check and thoroughly study everything, a trader will have to test it many times and check it on the training terminal. In any case, before starting to create a trading strategy, a trader must be aware of the importance of the algorithms laid down and, regardless of the circumstances within the market, follow them unconditionally, otherwise you can not hope for a positive result. Initially, the trader needs to determine the area of application and which trading system is taken as the basis. For example, if a market participant performs currency transactions using a short-term mode (pipsing, scalping), it is necessary to create a strategy based on these indicators. Using the “flute” system, it is worth building a trend strategy. It is necessary to choose a lot, which will be taken as the basis of trading. The next stage in the construction is the forecast of the trend direction with the subsequent detection of signals to determine the opening of trading positions. In order to be sure that the strategy is effective, stable and profitable, a trader should test it.
What to pay attention to when testing a trading strategy?
When testing, you should pay attention to the following indicators:
- profitability levels and drawdown levels when executing a large number of trades;
- selection of necessary filters and parameters for the trading strategy;
- if you achieve stable results during the test, you can start optimizing the system and install it on the workstation.
Typically, to determine the profitability and stability of the trading system, it is necessary to calculate and identify such percentage points as the level of drawdown, net profit, recovery factor, and be sure to take into account the number of transactions, because if a trader has tested the strategy once, it is far from stability. For a more accurate forecast, you should test the strategy for suitability a large number of times (about 100 trades and preferably not less).