Strategy Development

A successful trader can't be successful for very long without a good strategy.  If you ask me, trading is simply gambling if you don't have a plan.  Every serious trader should put a significant amount of time into coming up with strategies that give them the opportunity to be profitable day after day, week after week, and year after year.

A big part of strategy development is knowing and understanding what your good at.  There are an infinite amount of trades you could make everyday, but we all know its impossible to make every one of them.  Focus on finding the setups that make sense to you and that you are comfortable making.  Don't make things complicated; if your best setups come from support/resistance plays, make support/resistance plays.  If you crush the London session but give it all back during Asian trading, stop trading the Asian session until you understand what it takes to be successful during that time of day.  If your an ace during the open but aren't quite as good during midday, come up with a plan that lets you do the bulk of your trading in the morning.  There are many ways to be a successful, profitable trader so find your niche and perfect it.

No strategy is complete without a detailed risk management plan.  The best traders making losing trades every single day, yet they still make money.  Why??  They have good risk management skills.  You can start by establishing a maximum amount of your account you are willing to risk on any given trade. This will prevent you from letting one trade ruin your day.  Once you start to develop a deep playbook, you can tweak your risk management plan to allow certain setups to take on more risk.  Your may allow yourself to risk a little bit more on your very best setups in order to set yourself up for a big winner.  Alternatively, you would want to risk less on setups that have a lower probability of being successful.  A daily stop loss is also a good idea so you don't let one bad day ruin your month.  The pros make sure not to give back their hard-earned profits, and the rest of us should follow suit.

Another key is to do your homework.  Research is just as important to a strategy as anything else.  Learn how different sessions trade, how the markets react to different events, which setups work best in certain market environments, ect.  A good strategy is formed when a trader finds their edge and figures out how to exploit it.  Doing good research also allows you to be confident when your trading.  Sometimes it can be hard to pull the trigger, but if you've seen a particular setup happen over and over and over again it will be easier to confidently make the trade.

In my opinion, the two most important parts of any strategy are following your rules and adapting!  The markets are dynamic, ever-changing environments.  Things that worked in the past won't necessarily work in the future, and next year's best trading strategy might not even exist yet.  When the market adjusts, don't be afraid to adjust your strategy too.  Traders also change too.  As you become a better, more experienced trader, you may find different ways to generate alpha.  Adapt, but still follow your rules strictly.  A trader can easily lose their edge and compromise their entire strategy (and account) if they make exceptions to the rules.

Having a good strategy is one of the most important aspects of trading, so if you don't already have a good strategy start working on one!  Good luck and happy trading :).