How to Develop a Winning Trading Strategy For 2019 ?

Are you finally ready to stop toying around and develop a winning trading strategy for online trading? Good for you! This is exactly what you need if you up for making profits. A trading strategy states what you want to achieve and why. It’s a result of a thoughtful review of the available resources, your skills, abilities, and expectations. It serves as a compass to help you develop a successful trading plan.

How to devise a successful trading strategy for 2019? Follow the steps below:

Form a market ideology

Before creating a trading strategy, you need to understand how the market works. For that, you must form a market ideology. Ask yourself why you think you can make money from the market. This ideology will define every step that follows afterward.

Choose a market

The next important step is to choose the market for your trading strategy. Will it be Futures, Options, Equities, CFD or Forex?

If you are trading forex, learn about the currency in question. Understand how buying and selling works. Learn about different models offered by different forex brokers. Learn how margin is calculated. On the other hand, if you choose to trade equity, learn what a share means; the difference between penny and blue chip stock

Nevertheless, you need to have a thorough understanding of the market you are choosing as well as other markets.

Choose a trading tool to determine the trend

So how do you know when is the right time to trade? You can use a trading tool for that. This tool will tell you if the market is moving up or down. Other than tools, you can also use technical indicators like MACD and moving averages.

Pick a trading strategy

Now it’s time to pick the trading strategy. You might have to stick to a single strategy for this purpose because there is no 100% profitable strategy.

Your trading strategy must define the following:

  • Direction: Is the underlying asset expensive, cheap or does it have a fair value.

  • Entry trade: Decide whether you want to buy or sell the underlying asset.

  • Exit trade: Suppose that the underlying asset is fair priced. Decide if you want to hold a position or exit a position in that asset.

  • Price range: What price range you want for the asset at the particular trade?

  • Quantity: How many shares of stock do you want in the particular stock?

In the end, you will have the following chain:

I will purchase “X’ amount of stocks of corporation “ABC” at value “Z.”

Define your risk

Once you have the trading strategy ready, the next important move is to define your risk. It’s always best to take a limited risk. The best way of doing that is to use position sizing. It determines how much money you should put on the line. If you double the position size, it will double the risk. Hence, watch your position size carefully.

Jot down your trading rules

You might have memorized some of the trading rules by now. However, it’s good to have them in writing. It makes sure you maintain discipline and follow them with consistency. This will also help you maintain a record of your trading strategy. If later on, you have to refine anything that would become easier.

Follow the 90-day plan

Chances are the strategy that you are using is not bringing results. Don’t just abandon it right away. Stick to it for at least 90 days.

If you are uncertain, the right approach is to backtest your strategy. It is an effective component of a trading system. It is the process by which trades are reconstructed using historical data. The underlying theory of backtesting is that a strategy that worked well in the past is likely to work well in the future too. Several statistics are used for that such as annualized return, net profit/loss, risk-adjusted return, volatility measures, averages and more.

Improve the strategy whenever you have to

It’s possible that this trading strategy you are following is not profitable. That’s totally ok, it doesn’t have to work all the time. In fact, trading strategies are like living objects – they don’t remain static. Whenever the market situation changes, improvise and improve the strategy.

Maintain a trading log

It is important to keep track of your trades. Trade logging becomes necessary if you need statistics on how well your trading strategy has performed. This will help you improve your performance as you go. Keep all charts and images in good order.

No single strategy is a holy grail. Make amendments with your experience and your personal trading style.

Rinse and repeat

Evaluate your trades on a regular basis and as mentioned earlier, adapt to the changing market condition as you repeat these steps.

Final Words

The ultimate goal is to develop a trading strategy in 2019 that brings maximum gains. By now, you must already know that you never stop learning in trading. There will be challenges but it is important to remember why you started in the first place. As you build a thoughtful trading strategy, you will be instilling trading discipline into your approach. Extract reports from your trading software or platform, and do a self-analysis of your trading behavior by studying what worked for you and what didn’t. Be serious in following your trading plan and you’ll succeed.

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