In this article, we will look at how to research and build your own Forex trading strategy for big profits. Building your own trading strategy is easy if you follow the simple steps enclosed in this article.

The reason why anyone can build a Forex trading system is because the best systems are simple and not complex. Simple systems actually work better, than complex ones because Forex trading is an odds market and they have fewer elements to break. So lets look at some basics of building your strategy quickly and how to get on the road to trading success.

Time Period

You need to decide on the time period you wish to use and while day trading and scalping are popular, avoid it! All short term moves are random and you will end up making a lot of effort, taking low odds trades and losing. Either, swing trade overbought and oversold levels, looking for moves which last a few days to a week or follow long term trends which can last for weeks or months.

The Forex trading method you choose, will depend on your personality but both will work well.

Technical Analysis System

You can base your trading system on following price action and using technical analysis. If you do this, you will have a time efficient and powerful way to trade. Your not interested why Forex trends are moving you just want to make money when they do.

Generating Trading Signals

You should have a through understanding of support and resistance and look to trade divergence when market become overbought or oversold or use a breakout methodology. Breakout trading is a great way to trade long term trends and divergence is a great way to swing trade and both methods are discussed in greater detail on this site.

You need to have an understanding of standard deviation of price and volatility and again we have discussed this in other articles. You need some momentum indicators to confirm your moves. Don't clutter your system with too many 2 – 3 is fine and ones we like are - the ADX, MACD, Stochastic and RSI. As a volatility indicator Bollinger Bands are a great help

When you enter a trading signal, you need to check if momentum supports breakouts and also, divergence from a momentum indicator from price, can be used to enter a swing trade.

Don't try and simply predict a price level may hold or break, wait for confirmation before entering the trade. You can't predict lows or highs in advance so don't try, trade with the odds on your side and wait for market confirmation before trading.

Sentiment

If you want a warning of overbought and oversold keep your eye on sentiment and a great free report to help you do this is – The CFTC Net Traders positions and a good paid for report is % bullish by Market Vane. Sentiment indicators are just to alert you to potential moves and should not be used to enter signals – for this, you should use your charts and indicators.

Money Management

Don't leverage up to high 10:1 is enough for most traders and while you have to have an exit plan, don't put your stops to close. This is a key error made by most traders so de leverage so you can risk more to your stop. We would say that you should risk up to 5% per trade and in terms of your money management, make sure you look at your account as a whole in terms of risk, as well as individual positions.

% Of Correct Trades

The best trading systems win between 30 – 50% of there trades and this is a good number to aim for. If you have good money management, your winners will be far bigger than your losers and will allow you to make huge gains overall. Don't look for perfection its not possible, focus on tight risk control and making money.

Final Words

You can easily put together a Forex trading strategy for success using the above guidelines, there easy to follow and if you use them, you can build and trade a simple Forex trading strategy, for long term trading success.