Having a Forex trading strategy is absolutely imperative if you are to be successful in the Forex market. Forex trading strategies are viewed in two different ways. Some traders see strategies as complete trading plans which may include several different Forex trading systems. For many traders, however, the word "strategies" is used synonymously with the word "systems".
Whether you call a strategy a system is completely up to you. The most important thing is that it is a set of rules or methods that are researched prior to actually trading. The strategy can simply start off as the basic idea of how you think the market should be traded. This would include step-by-step instructions of what to do during every phase of the trade. Some people think of it the same as a strategy for playing chess. Chess players don't just react to the moves of their opponents, they anticipate them. In fact, a chess player will anticipate many possible different moves from an opponent and will include ways to counteract those moves in their chess playing strategy.
Much like a chess player above, the trader needs to anticipate what may happen during each phase of the trade. This is where a strategy is particularly important, because it has measures in place that are activated based upon how the market moves. For instance, if a trader buys the EURUSD they already know ahead of time that the price will go in their direction, go in the opposite direction, or basically stay the same. As the foreign exchange markets are known for moving it is unlikely that the price will stay the same for very long. This means that in basically every trade the market will move either with you or against you.
In our EURUSD example above the prepared trader already knows what to do because of their trading strategy. If the market moves against them they have risk control measures in place to prevent any catastrophic loss which may jeopardize the equity in the account. If the market moves with them then they have profit taking measures in place to either take profit and a predetermined price point, protect their profits with a trailing stop, or let the momentum of the market determine their exit point.
As you can see you absolutely, positively must have a trading strategy to be successful in the Forex market. The last thing you want is to have to guess and hope once you are in a trade. Strategies help you keep focused, confident, and ultimately disciplined enough to be a consistently profitable Forex trader.
