A Forex Trading Strategy is your game plan for pulling profits out of the market.
It encompasses the big picture snapshot of your entire trading business approach which will contain your actual trading systems, money management procedures, take into account your available resources, back up processes and stop trading limits.
Within your Forex Trading Strategy is where you will find your long term trading success, and have a life at the same time.
In the Forex Trading Strategy Guide, I’ll go over the following topics:
- Building your Forex Trading Strategy
- A Strategic Approach To Forex Trading Using Your Available Resources
- The Objective Of Your Forex Trading Strategy
- How Forex Trading Systems fit into your Trading Strategy, and
- Building a Learning Curve Buffer into your Forex Trading Strategy.
Because this is a relatively long article, the last two topics on Forex Trading Systems and Learning Curve Buffer will be covered in part 2 of the Forex Trading Strategy Guide, ok?
Great! Let’s begin…
Building Your Forex Trading Strategy
Your forex trading strategy is the result of answering a series of questions about yourself and what you want to accomplish out of forex trading.
To be successful in trading, it’s more than just a “make money trading” mentality. In the development of your Forex Trading Strategy, you will go further in-depth to define exactly how you will position yourself for profits in the forex markets, as well as what you are willing to invest in yourself for trading success.
In the process of answering those questions, you will uncover possible blind spots in your trading knowledge. That’s when you fill in the blanks to obtain a more comprehensive picture of the reality of forex trading.
It will be within the space of your forex trading strategy that your trading systems will fit in. With a good forex trading strategy, you will know which systems to invest in and master first, simply because they fit in with what you are trying to accomplish in your trading. You will stop chasing forex trading systems simply for the sake of chasing them! 
A Strategic Approach To Forex Trading Using Your Available Resources
In the development of your trading strategy, you have to take stock of your existing resources. What do I mean by existing resources?
They are simply:
- Your Available Time for Study and Trading
- Your Available Investment Capital for Actual Live Trading
- Your Existing Knowledge of Forex Trading
- Your Available Hardware and Software (Your Trading Tools)
With a solid understanding of your existing resources, you can then start further defining your trading objective beyond just “making money from forex trading”.
The amount of time you have available will determine your speed of progress. Your available trading capital also helps put the expected actual dollar returns into proper perspective. Your existing knowledge determines what you need to learn in order to move on, and your available hardware and software will determine what you need to have to trade your particular strategy.
The Objective of Your Forex Trading Strategy
As you start to gather a better understanding of the various approaches towards trading the forex markets, together with the knowledge of your trading resources, you will be better able to develop a congruent trading objective.
Long Term Trading Versus Shorter Term Trading
Typically, position trading requires a longer time frame and sitting through larger swings up and down in the market place. It also means that while you trade less, the potential for larger profits per trade are there for your taking. Of course, the actual return on your total trading capital will be dependent upon the risk you are willing to take per trade. 
The higher the percentage of your trading capital you are willing to risk, the higher the potential overall return on your trading capital.
On the other hand, the shorter the time frame you are trading in, the more potential trades there are available to take. Which, in most cases, requires more time and attention from you to manage your trading account.
The profit per trade will usually also be smaller than the profit you’d expect from taking a longer term trading position. And of course, the overall return on your capital will also be dependent on how much total capital risk you are willing to take per trade.
Deciding On The Objective of Your Forex Trading Strategy
This brings you to the next question.
What are you trading for?
- Building your capital for retirement?
- Trading for regular monthly income?
- To earn better returns on your capital than just leaving it in the bank?
- Don’t know, you’ll take anything that comes along?
I certainly hope it’s not the last choice on the list. While the list may not be exhaustive (it isn’t meant to be), it gives you an idea of what kind of objectives you might possibly have when you start trading the forex markets.
It’s true that while you can’t decide exactly how much you will make in any given time period of a week, a month or a year, knowing your objective helps align your activities with what you are attempting to accomplish.
If you are building your capital for retirement, you naturally want to take a longer term position and less trading activity in your accounts. This is likely because you already have a source of income that you depend upon for your living expenses.
If you are trading for regular monthly income, you can’t afford to sit on a long term position and wait for it to hit the profit target in 4 - 6 months time. That’s because you need income every month for your living expenses!
When you are trading for regular monthly income, you naturally have to shift towards shorter term trading. It also means that the amount of trading activity in your account will be higher, and you have to be sharper in your trading skills.
When you move into shorter term trading, you have to be sharper in timing market entries and more disciplined in exiting losing positions. Which is why the shorter the time frame in which you trade, the better you have to be. For novice traders, take note of this point!
In Part 2, we will cover:
- How Trading Systems Fit Into Your Forex Trading Strategy
- Does Your Forex Trading Strategy Have A Learning Curve Buffer?