Essential Components of Trading Strategy

Essential Components of Trading Strategy

We all know that a trading strategy plays an important role in the trading market. A good trading strategy can make you a successful trader. On the other hand, a weak trading strategy can destroy your trading life. There are some components of the trading strategy which you need to know. The essential components are discussed here.

Determining directional bias, competent entry

Constructing a directional bias will help you to know the trend of the market, and the price ranges of the stocks. There are two components to it. One is to predict the uptrend and the downtrend. Another is trading rules which can facilitate you in certain conditions. There are two options to make a competent entry. One is fundamental analysis, another is technical analysis. This is crucial to know about the fundamentals of your trades. You need to know about the dividend like the elite traders in Singapore. Technical knowledge is very important to execute the plan. Your knowledge about the indicators and tools will help you to qualify your entry in the market.

Regulate Your Stop-loss and Take Profit

In your trading strategy, you need to include your stop-loss and take profit targets. This is very crucial. This will identify your profits. You have to how much loss you can bear instead of how much profits. Mention both of them in your trading strategy. Remember that you need to regulate practical stop-loss and take profit target. Before executing a plan, clarify these two things in your strategy. To do this properly, you can read some trading journals which can help you to fix these. Visit https://www.home.saxo/en-sg/products/cfds to know more about the trade execution process in CFD market. This will definitely make you a good trader.

Mention Your Timeframe

Your timeframe must be included in the trading strategy. You need to remember that people choose the timeframe according to their preference. You cannot choose what is right or what is wrong. This is not possible. I f you can spend time more, you can choose an intraday time frame. If you cannot spend a long time in the market, you can do trade as a day trader or quick scalper. This depends on you. Remember that your trading strategy will be executed according to your timeframe. There is no particular techniques or rules for choosing a timeframe. See your requirements. Find out your strength and weakness. Then decide your timeframe. Choose what you can afford.

Risk Management Issue

Try to take a risk not more than 2%. If you take more risk to gain more reward, it can be destructive. Mention your risk management strategy in your plan. You need to take risk half of the reward. The ratio is at least 1:2. This is called the risk-reward ratio. Do not take more risks, it can ruin your capital. Keep patience and decide what to do. Before doing, make a list of your necessary factors. Every trader’s goal is to make money. Because of getting a large profit, do not destroy your capital. Without capital, you cannot go in the long run. Secure your capital to do trade. The process of saving your capital mention in your trading strategy.

Your trading strategy depends on you. If you make a trading strategy, you will able to make your decision logically. It will control your emotions. If you have a trading plan, you can decide what to do when the market is going against you. Different traders have different trading strategies. Day traders’ trading strategy is different from the intraday traders. Some want to take a small profit, but want to secure their capital. On the other hand, some want to make more profits by taking huge risk. This varies from person to person. These four components must be mentioned in the trading strategy. Without these, your trading strategy is not strong to do trade.

Tom Spiggle
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