Trading Methodology

Alright, so you have discovered Currency Trading, also know widely as Forex Trading. Now, how does one actually go about trading foreign currency? Well, you need to develop a set of rules, strategies which I would hereon refer to as Trading Methodology. Sounds difficult? Well, it is not really difficult but at the same time it is not easy.

You see, if one were to trade without a methodology, it is no longer trading. It becomes a game of chance, where you are constantly guessing. So to take out the guessing from the trading experience, we need a methodology.

A Trading methodology is a Trading System. A strategy that you practice in your day to day trade decisions.
Trading Methodology - a set of rules that formulate buy and sell signals without any ambiguity or doubts. These are generally generated by a technical indicator or a set of technical indicators. The sole purpose of having a Trading Methodology is to manage risks.

Understand that trading is all about Risk Management.

Benefits of having a Trading Methodology - It removes emotions from your decision making process.

Now, be aware that there are many websites that claim to provide you with proven successful trading methodologies. Do not be carried away by advertising and desperation in your search for that perfect trading methodology. If you have done sufficient homework and research before diving into live trading, you would already have a simple structure in the way you make your trade decesions. You would also have tried out different indicators and charting tools to enter or exit positions in FOREX. Developing a Trading Methodology is as simple as cooking your signature dish. Sorry for the analogy if you don't cook & feel out of place in a kitchen but you kind of get my point don't you?

People in this business are constantly exposed to information and misinformation. We need to now how to sieve out the effective news that matters, from all the noise out there.

How do you know if your current trading methodology is effective? You need to constantly monitor the performance of your trading methodology. How do you monitor? By keeping a trade journal. Your success rate will show you if you are doing the right thing. You can only achieve this if you have been religiously recording your trades and reasons for that trade.

Trading Methodolgy is in essence a Trading Strategy. No matter what your strategy is, always remember the key components of a methodology. They are, Reliability, Risk Reward Ratio, Trading Frequency, Draw Downs and Leverage.

These key components do not change, no matter what you trade, where you trade and what time frame you trade on. These are the pillars of a successful Trade Methodology. Not having one means, you are trading blind. Trading blind means, you are probably gambling your money away.

Lastly, No strategy is better than the other. A good strategy is one that is compatible with your goal, your appetite for risks and above all your personality. Remember, one man's loss is another man's profit... Good Luck!