How to Get Ideas for Trading Strategy?

If you're reading this, you're likely seeking new ways to get ideas for trading strategy. The Forex market is characterized by high volatility and there are countless trading opportunities to make money trading.

This presents an opportune period to delve into learning effective trading strategies and come up with new trading ideas. The core principle is to establish a consistent and easily replicable approach that is based on your trading style.

Relying on methods like scouring through social media, blog posts, and research reports for trade ideas is a taxing and inconsistent approach because there may be weeks where you might discover multiple promising trade ideas, followed by weeks of stagnation.

Your trading results are a reflection of the consistency of your trading process.

In this article, we will explore methods that bring stability to the process of generating trading ideas. This pursuit aims to create a constant supply of best trading ideas, allowing for a perpetual source of inspiration.

What Is A Trading Idea?

A trading idea is akin to a predefined trading plan for executing trades or a trading strategy. It involves recognizing recurring scenarios or chart patterns that tend to unfold in the financial market.

For instance, if there's evidence suggesting potential stocks or currency pairs’ forthcoming price movement in a particular direction, many traders use this opportunity to observe important factors like:

Price action,
Technical indicators,
Fundamental data,
Market conditions (trending, sideways, and volatile),
Market trends (bullish, bearish or ranging),
Etc.

And, learn if this is a recurring price behavior that can be used in the future as the main idea to forecast price fluctuations.

Over time, these initial trading ideas can develop into your trading strategy tailored to your trading style. As you get better at the process of recognizing new ideas trading will improve.

How Do You Develop An Effective Trading Strategy?

The development of an effective trading strategy hinges on your unique objectives. The journey of day traders diverges from that of Forex traders swing trading, just as it contrasts with the path of other traders that employ different trading styles and have different trading experiences.

Before delving into the mechanics of constructing a systematic trade idea strategy, we must delve into the root of your idea-sourcing methods.

Let's do an exercise.

Do you predominantly derive your trading ideas through technical analysis or fundamental analysis?

Allocate some time to list as many sources of trading ideas as you can think of. Every trading idea demands thorough consideration because you never know what trading strategy may work.

Below are some examples of the most common sources to how to get ideas for trading strategy:

If you’re a stock trader you’re probably using a stock screener
Follow other successful traders who may share their trading ideas on Forex forums, Twitter, or Forex Telegram channels.
Use automation trading tools to generate new trading ideas.
Read the news.
Follow free and paid Forex signals.
Tweaking your strategy to make it work in different time frames can be a great source of new trading ideas.
Study other strategies (if you’re day trading you may want to also try position trading).

While for many, finding a steady influx of ideas demands time and introspection, the overarching process can be broken down into three core stages:

Sourcing the trading ideas.
Refining the idea list and narrowing it down to only the great ideas that have proven to work in the past.
Selecting prime ideas for subsequent analysis and backtesting on paper trading.

How To Use Trade Ideas

The journey from an idea to a strategy is a critical path that requires diligence and a structured approach. The Forex market hosts a diverse range of traders, each with their distinct methods, yet interconnected by the common goal of making money.

Every trading idea holds potential, but its transformation into a viable strategy demands a systematic process.

Follow these 10 steps to get moving from a trading idea to your first trading strategy:

Step 1: Acquire Trading Knowledge

A trading idea, while promising, remains incomplete without a thorough understanding of the underlying trading concepts, which is why knowledge forms the bedrock of successful trading.

Relying solely on intuition or chance is a gimballing. By comprehending the fundamentals of trading, you elevate your approach from speculation to informed decision-making.

Step 2: Avoid the Perfection Trap in Trading

Perfection in trading strategies is your worst enemy.

FX traders often fall into the trap of endlessly searching for the 'perfect' technical indicators or setup. However, the key lies in designing a structured system and continuously refining it over time. This step recognizes that trading strategies evolve, dispelling the disappointment of rigid expectations.

Step 3: Study Price Action

One of the best ways to generate day trading ideas is to follow the 10,000-hour rule, which states that a successful trader needs to study at least 10,000 hours of the stock charts or Forex charts to build their trading skills.

It's through in-depth research that the raw data transforms into actionable trading ideas. This critical step serves to substantiate the identified patterns and data, leading to informed entry and exit signals.

Step 4: Seek out Triggers

The approach to identifying potential trigger catalysts often revolves around staying well-informed through news sources.

A catalyst, in essence, encompasses any event capable of exerting an enduring impact on the value of a currency pair over time. This can encompass an array of factors, ranging from positive to negative news releases.

Step 5: Gaining Insights from Historical Trends

The old trading adage "history repeats itself" reverberates as a guiding principle for anticipating market behavior and strong trends.

By analyzing historical patterns, cycles, seasonal patterns, and trends, traders can generate trading ideas that other traders may not see. Many strategies focus on taking advantage of:

Historical support and resistance levels.
Chart patterns (Head and Shoulder, Double top and bottom, Triangles, etc.).
Seasonal patterns in Forex market.
Cycles in financial markets.
Etc.

Step 6: Follow Successful Traders and Read Trading Books

Drawing insights from successful traders and trading books can significantly contribute to enhancing your trading strategies. While emulating another trader's every move and duplicating their trades may not lead to success, examining their overall trading approach and methodology to incorporate elements that resonate with your trading style.

In addition to fellow traders' experiences, a wealth of educational material, including trading books, blogs, forums, and articles, can provide foundational trading strategy ideas.

Before crafting a trading strategy and getting started trading, defining your style is a pivotal step. Elements like preferred time frames, tradable assets, risk tolerance, risk-to-reward ratios, and acceptable drawdown levels require clear definitions.

Step 7: Choose High Volatility Currency Pairs

Engaging in a currency pair devoid of trading activity, particularly in the case of exotic or minor FX pairs, poses significant risks. In such scenarios, the scarcity of trading volume amplifies the challenges associated with executing timely trade exit points.

A currency pair with robust trading volume facilitates efficient trade execution. Conversely, low-volume currency pairs introduce obstacles to entering trades at desired entry points. In the pursuit of crafting an effective trading strategy, the selection of currency pairs marked by substantial volatility holds immense significance.

Step 8: Set Trading Alerts

Even for a vigilant day trader who remains glued to their screen, the reality is that trading opportunities can slip through the cracks.

Price alerts emerge as a practical solution, enabling you to capitalize on potential setups even during moments of detachment from your computer. While you might diligently monitor the markets, the significance of automated alerts cannot be understated. Fortunately, most brokerages extend the facility to configure price alerts tailored to your account.

Step 9: Exercising Caution with Forex Gurus

In the world of Forex trading, it's crucial to approach with caution those who claim to be Forex gurus because their primary focus often revolves around their financial gains, rather than your own.

It's prudent to be wary of trading gurus who make grandiose statements about the inevitable rise of currency pairs or predict unprecedented market events.

While not all trading gurus should be dismissed outright, it's advisable to avoid placing unwavering trust in their predictions and trade signals. Instead, sift through their offerings, extracting only what aligns with your well-defined trade philosophy.

Step 10: Enhancing Your Trading Strategy

Your first trading strategy might not yield immediate profitability – a fact that is entirely normal, and will often entail a journey of trial and error.

This is the reason why traders need a plan for refining their trading strategy. We emphasize the value of forward testing – a process that involves meticulous documentation of market observations, trade records, and organized chart images.

Let empirically driven insights shape your trading approach rather than focus on immediate profits.

Final Thoughts

At the core of how to get ideas for trading strategy lays the ability to pinpoint trading ideas that align seamlessly with your style and preferences, which becomes your base to navigate the complexities of charts, patterns, and market catalysts.

No matter the avenue through which trade ideas come your way, the critical aspect remains subjecting them to the 10 steps above. This ensures that your trading ideas undergo rigorous scrutiny, leading to the selection of only the best trading ideas that have proven in the past to work.

By consistently implementing these strategies, continually testing them, and relying on their efficacy, you foster a foundation for success. In the face of changing market dynamics, your adaptability shines as you seamlessly replace less effective strategies with fresh, viable alternatives.

To ensure you have the best tools at your disposal, explore our comprehensive Forex brokers comparison page to equip yourself with the right trading platform for your trading strategy.