How to Design a Forex Strategy

Creating a profitable and effective forex trading strategy is perhaps one of the most difficult tasks one can accomplish in the world. With the proper planning and mindset it is possible to achieve this task of building a profitable trading system.
The use of leverage must be considered very carefully when designing a trading system. While using a lot of leverage does provide the possibility for very high returns it also can cause a margin call very quickly leading to an account being blown out.
When developing a forex strategy one of the first factors you need to determine is what time frame you want to trade. The amount of time you are willing and able to spend in front of the charts trading will ultimately determine what time frame you create your system around.
Choosing what currency pairs or pair to trade is important as each act with their own behavior and characteristics. Some pairs are active trading in large daily ranges while others are more consistent trading in tighter trading ranges.
For best results when creating your strategy use different indicators and price patterns to narrow down what works best for your trading style. Using price action along with indicators tends to produce the best results for all trading systems.
Often the most overlooked aspect of a trading system is money management. Only using favorable risk to reward ratios along with good money management is essential to the success of a method.
Once you have finished building your strategy it is important to test your system under a demo. It is highly recommended to trade the method under a demo for at least six months under a demo in order to trade through all markets conditions; the market in a six month period tends to experience both trending and non trending periods.
When developing a forex trading strategy is is very important to weigh the risks vs the rewards. It is therefore necessary to consider the following how to have robust consistent returns while at the same time always being risk adverse making sure you are never putting your capital in jeopardy of taking a loss that is too difficult to recover from.