5 Guaranteed Ways to Write a Winning Trading Strategy

trading strategy

6 Key things must be included in your trading strategy if you want to make money in your trading. I’m going to lay those out for you step by step in order for you to develop your trading strategy.

Now, the first thing you should remember is that it’s not necessary for you to start from scratch or reinvent the wheel. Plenty of successful strategies are available for you to look at when deciding what strategy you want to trade.  I will link to several good ones that we have published on our website.

However, I don’t recommend that you just take someone else’s strategy and start trading it. Why? Because you need to develop it and make it your own. It must be incorporated into your training plan.

1. Time of Day to Trade

 The first thing that you need to determine is the times that you will be trading. You will know the answer based on the information that was included in the training plan about your lifestyle goals for your trading.

 For example my personal times for trading is 8 a.m. to about 2 p.m. Eastern Standard Time. I don’t want to have my home life interrupt my work life, so I’m only looking at charts during the work day.

2. Chart Time Frame

The next thing that should be included in your strategy is what time frame charts you want to trade. Longer time frames means you will have to do less adjusting to your trade. If you’re trading a daily time frame, then you should only have to look at your charts once a day which is how I trade.

I use the daily charts because it can still deliver me a high level of profit with a lot less time involvement. To me, that’s a win/win situation. Click To Tweet

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Because I’ve made this decision on the front end, it helps me filter through all of the other strategies that are available that are on lower time frames, thus helping me find my trading strategy with less research.

3. Entry Criteria

Once you have your time frame established, you will have to then determine the entry criteria. Every strategy should have specific criteria that must be met before entering a trade. I could talk about a lot of different criteria, about different filters that you could use. It could be price action; it could be fundamental analysis or even using specific technical indicators.

For my personal strategy, I use a combination of support and resistance areas in trend pullbacks. You can learn more about my strategy by reading the Double Trend Trap report.

4. Exit Criteria

Now that you have determined what your entry criteria is it’s important to figure out how to exit your trade.

The primary way to determine trade exits is with take profits and stop losses. These exits can be determined by looking at technical analysis and also profit or loss. Some traders use technical levels to place their stops and their targets where some traders base their stops and targets on the dollar amount or others base their stops on risk vs reward. It’s up to you to determine how you’re going to do this. It may seem like there are a lot of decisions to be made when planning your strategy and there are. That’s why you can’t just follow someone else’s strategy without making it your own. One reason is that there are very few strategies published that have all of these details and so even if you find a good strategy, you have to determine some of the smaller details on your own.

5. Trade Management

One key component that should be planned out while developing your strategy is how you’re going to manage the trade after you have entered the position. Many traders open the trade, set this up and the take profit and they don’t change anything after that, which is the simplest trade management strategy.

Some traders will move their stuff plus to follow a trade. There’s even another technique in which you have had multiple positions to your trade come up. You can add positions if the trade moves in your direction or you can add positions if the trade moves against you. Different traders, different things with the Trade Management. Trade Management is a critical element to any trade strategy and that is why you can see many times that one trader will be trading the exact same truth strategy as another trader and they will get completely different results. I have actually documented this many times and the different results are shocking based on trade management

Trade Management is where your strategy can really be tweaked and changed to bring forward greater profitability.   This is also the area where many traders get lazy and don’t properly document how they are trading and that can cause them to be losing money. It’s important to make sure that you track everything and that you follow your trade management as written out in your strategy.

The last element that should be decided in your strategy planning is risk management. There are different methods for calculating risk. The first method is bots-based trading. This is a fairly simple method in which a trader will take the same lot size on every trade. The amount of money either made or lost on that trade changes based on your take profit and stop loss. Another simple method which is favored by traders is a dollar-based risk where a trader will risk a set dollar amount on every trade. For example, $100 on every trade they make. It will be a $100 risk and the profit level will change based on when they exit if they exit at a profit. They could make anywhere from $10 to $25 to $100, but they’re still only going to risk that $100. Another popular risk management concept is to use percent-based traits. The way to do this is to calculate your loss size, so if you’re trading at $10,000 account and you risk 1% then your stop-loss would be set so that you’re only losing $100.

Once you’ve gone through all of those steps you should now have the perfect Trading strategy. Remember that a trading strategy is not a standalone item. It should be incorporated into an all-encompassing trade plan which goes into much more detail than just a strategy. It is also critically important that you are tracking, analyzing and reviewing all of your trades. I recommend that you have other people look at your strategy and have them review your trades to help you with your accountability.

Thank you for reading the article. If you have any comments or questions, please feel free to leave them below. I will personally answer any question that you may have regarding this article about trading strategies.

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Casey Stubbs is the founder of Winners Edge Trading, which is one of the most widely read forex sites on the web. Winners Edge Trading has trained thousands of people to trade the Forex markets.

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  • I only need to look at charts once and those are the hours I am available to look at them. I dont ever trade outside 8am to 2 pm.

  • David

    Hello Casy, I’m a bit confused as to why, if you’re trading Daily charts which you say only have to be checked once a day, you’re trading from 8 am to 2 pm, i.e. 6 hours a day.