The Importance of Strategy

Trading strategy is the first thing you have to do in your path of becoming a professional trader. You can survive and even make huge profits with really simple trading strategy if you have the right attitude. However, in most cases, you have to start with the building of strategy. Once you have detailed trading strategy, you have good ground for developing your trading execution and attitude.

The strategy have match with your personality. If not, you will not be able to execute the strategy efficiently. Even if you have a profitable edge, you will not be profitable if you are not able execute your strategy in descent manner. So, you have to match your strategy with your personality and with your risk tolerance. Read more about strategy execution here.

It really does not matter what kind of strategy you are using but how well it matches with you and your personality. From here it comes back to the execution of the strategy: strategy that is in line with your personality is also more executable and you will be more profitable.

You also have to be sure about your edge. You are not going to be profitable if you are not sure about the profitability of your strategy. So, it is crucial that you do your homework and back test your strategy to be sure that you really have an edge. In this way you can be more self-confident about your trading. Look more about this area of trading in trading psychology section.

Also your strategy has to be detailed including every possible market behaviour and how you should act in these different situations, so that nothing is coming as a surprise for you when trading.

Profit taking and cutting losses

The strategy has to incorporate the rules that define when you are taking your profits and cutting your losses. The profit taking can be scaled using fixed profit levels, technical indicators or support or resistant levels. Whatever method is utilized, the signal should be so clear that you don't have to make any subjective evaluation. The same holds true also with loosing trades.