When looking for the best trading strategy for your futures and forex trading, look for simplicity. The financial markets give many technical indicators for people to use to determine upcoming moves which can be implemented into any trading strategy. The issue is complexity which causes confusion as well as emotional hesitation to place a trade. Think of the futures and forex markets as an indicator in itself, so if you are already using an indicator why use many more to confirm what you are already being told via price action. You may ask how is price action an indicator; it is simply indicating what has happened in the past so that you can place a defined value on the chosen futures or forex market. Therefor price action is indicative of historical psychology of traders all around the world.
To find the best trading strategy you will want to ask youself the most basic of questions to determine if the strategy in question is capable of measuring the true value of an instrument or if it is using lagging indicators to be told the current direction of price.....Let me explain....
When you go out shopping for any tangible item (lets use a new pair of shoes for this example), the average person is more likely to buy when they see that the shoes are 50% OFF which tells you that the true value has dropped in price making the shoes cheaper. This helps you make a clear decision so that you know you are getting a good deal as opposed to paying full retail price. Now lets say that same pair of shoes were on sale for 50% OFF, would you wait for them to go back up to only 25% OFF before you make the purchase??? No because you would not get as good of a deal....So you have now placed a true value of the shoe at 50% OFF and made a great purchase instead of waiting for price to move back up. This makes you a SMART BUYER!
Now lets look at the futures and forex markets....The average person looks at the financial markets the exact opposite, and have the thought process that the value is only there after price is moving in that direction....Price Action allows us to have all of the historical data to determine what the previous value of that instrument has been. This gives us the ability to buy ON SALE and sell AT RETAIL (BUY LOW, SELL HIGH). If you use multiple indicators to tell you what you should already know, this is the same as waiting for the pair of shoes to go back to only 25% OFF.
We always want to buy at levels of discount, and sell at levels when expensive. This puts you in favor of the Smart Money because you are dictating the true value of any given instrument instead of following the crowd of retail traders.
How to find the best trading strategy for futures and forex trading....
1. Does the strategy require multiple indicators to determine an entry? (price is the only indicator needed)
2. Are you buying after price has rallied? (we never want to buy after the rally)
3. Are you selling after price has declined? (we never want to sell after the decline)
4. Does the strategy relate to all buying/selling aspects of life? (it should!!!)
5. When analyzing does the method confuse? (if so do not trade it until fully understanding)
6. Are the buying/selling opportunities clear and decisive? (be sure they are)
7. Can the strategy be backtested using historical price data? (you should always backtest)
8. Do the professionals use this style of trading strategy? (trade like a pro, NOT a novice)
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