Developing a professional CFD trading strategy is not a child’s game. In fact, many skilled people will find it hard to develop a well-balanced trading strategy. You have to be extremely cautious about your trade execution process and focus on long-term goals.
Unless you are mentally prepared to devote yourself, you will never learn to create a professional trading strategy within a short time. To develop a professional trading method, you have to follow some cardinal rules. Let’s check some of the key steps which can help us to curate a professional trading strategy.
Knowing about the market
Before we take any trades, we should learn more about the market. Without learning about the market, it will be a very big challenge to decide what kind of trading strategy we want to develop. Once you have a basic idea about the nature of the price movement of different instruments, we can be able to determine which trading method will be best for us. For instance, you asses the CFD market properly, you will realize, volatility is very high during the overlapping trading session. So, if you intend to trade during the overlapping trading session, you should be selecting a quick scalping method.
Some people often start to trade the market without having a strong basic knowledge. They expect to make profit based on gut feelings. But if this was so easy, no one would have tried hard to master the technical and fundamental details of the market. So, be mentally prepared to study a lot. Unless you do that, you will not learn the proper way to execute the trades. And failing to execute quality trades usually results in blowing up the trading account. That’s why smart traders always encourage the rookie traders to learn the basics. Without having a strong foundation, no one can do well in the investment business.
Creating the draft
Before you develop your trading strategy, you should create a draft plan. It should contain the basic steps which will help you to achieve your goal. For instance, if you wish to curate a trend trading strategy, you should write down the list of tools that you are going to use for that trading system. So, for the trend trading method, tools like Fibonacci, moving average, trend line, etc. will be on the list. Once you have the draft plan ready, it’s time to move the demo trading account.
The rookies often creates complex trading strategy and become overconfident with their approach. But there is no real benefit in using a complex trading method. So, try to keep things simple while creating the draft trading method. If required, you may learn about the price action trading method. With this trading technique, you should be able to find the reliable trade signals without the use of any indicators. Most importantly, you will feel much more confident with your actions. Moreover, the trades will also have tight stop loss which will limit the losses to a great extent.
Using the demo account
To develop your trading strategy, you have to use the best demo account. Get it from here and start examining different kinds of trading techniques. During the development phase, you might become confused with your actions and this is very normal. But make sure you don’t stop testing. Use different kinds of methods and try to develop a balanced way by which you can find reliable trade signals. Once you become good at finding the potential trade signals at the important support and resistance level, you may start working on your next phase.
Though demo account provides you the perfect learning environment, you need to take things seriously. You need to consider your actions with extreme caution. It’s more like trading the demo account. Once you have that mindset, you will know what it takes to become a professional trader. Thus, you will know the right path to succeed in trading profession.
Determine the risk to reward ratio
Before you determine the risk factor, you should determine the risk to reward ratio for each trade. A good trader should have a 1:3 or higher risk to reward ratio. Some people often try to trade the market with a 1:1 risk to reward ratio. They think that they will do fine since their system has a high win rate. But the high rate is not going to protect your trading capital when you are dealing with such a low risk to reward ratio. Some professionals even use 1:7 risk to reward ratio in their trades. By doing so, they can easily cover 7 losing trades with one good trade. This significantly reduces the stress from a trader’s mind.
Once you become confident with the standard risk to reward ratio factor, you may start using the trailing stop loss feature. With the help of the trailing stops, you should be able to ride the major trend with high level of precision. But remember, you need to have a strong knowledge about the support and resistance level and only then you can use this feature like a pro trader.
Test your trading system
Once you have curated the trading system, you need to test it in the demo account. Use the newly developed trading strategy in the demo trading environment for few months. Try to make a consistent profit without taking high risks or breaking the rules. If you manage to make a regular profit in three consecutive months, you can say that you have a balanced trading system. But make sure you consider the stress associated with your trading system.
If you feel pressured or stressed while using this system, it would be wise to bring some positive change. A good trading system is always very relaxing and never pushes a trader in the line of fire. Keep on revising your trading system till you feel confident with the new system. But do not start trading with real money till you can earn money in the paper trading account.