Trading Strategy Why And How

What is a trading strategy

A trading strategy is method of buying and selling in markets that is based on predefined rules used to make trading decisions.

Why do you need a trading strategy

By writing down the actual rules or steps you follow for each trade, this makes your trading Actionable. This is such that there will not be any argument or misunderstanding on how to trade. Treat it like a contract on what you would do for performing trades.

Over time using the same strategy, this also allows you to measure the performance of the strategy such as win rate and risk reward ratio. This makes your trading Measureable and allow you to improve upon it.

Consideration in developing trading strategy

Here are certain things to consider when developing a trading strategy. Not everything is needed or relavent. These are mainly for technical analysis.

1. Asset to trade
2. Period of chart
3. Market condition / Signal generation
4. Entry point
5. Risk management (lot size, stop loss, take profit, risk reward ratio)
6. Exit point