7 steps to building a trading strategy

A trading strategy is a systematic methodology based on predefined rules and criteria that answers three major questions:

•What do you trade?
•Where do you trade?
•How do you trade?

How to build a trading strategy ?

When you start building your trading strategy, you can think of it as building a home:

•Psychology and discipline are the essential foundation.
•The walls of your building include a trading journal, market analysis, trading plan, and risk/money management.
•The strategy itself serves as the roof of the building. The final piece ties everything together and helps you trade confidently, knowing what you’re doing and why, without guessing.

Advantages of having a trading strategy

A detailed strategy brings you one step closer to consistent results in trading.
You don’t need to ponder over every new trade, as you have predefined rules for entering and exiting a trade.
You use objective data to make specific decisions.
You avoid behavioral biases.

How to develop a trading strategy

Start your trading journal and write everything down.
Define your trading goals and risk-to-reward ratio.
Choose the instruments you want to trade.
Decide what technical indicators and fundamental factors you will use.
Establish your timeframe.
Set your risk management values.
Trade with your strategy on a demo account and make amendments if necessary.

Now that you have built your strategy and tested it on your demo account, you can switch to your real trading account and start trading. Make sure you follow all your rules and review your results to ensure they meet your expectations and goals.

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