Trading strategy benefits
A trading strategy is a set of specific rules that guide a trader. An idea for a strategy can arise literally out of the blue. But for its practical use, it needs a test as follows:
First, the trader chooses the assets to apply a new strategy. Then they check its effectiveness on historical data: as if they used this strategy ten years ago, and now look at the results. If the outcome is acceptable, the trader can practice such a trading system.
Newcomers usually do not have a plan of action, and as a result, their trading turns into a chaotic set of transactions. A clear plan avoids this because the trader knows exactly what to do.
In addition, the lack of instructions also affects on an emotional level. For example, if the price of an asset falls, a person without a plan may panic and quit trading at the wrong time: just when the price returns to its previous trend.
Finally, the effectiveness of the trading system is evaluated according to historical data. For example, if the chosen strategy had worked with similar behavior of the asset a year ago, this strategy would likely be effective now.
As you have understood, trading with strategies is much more efficient and safer than entering and exiting a trade at random. And don’t be confused by the fact that there are hundreds of trading systems – choose a few of the most attractive and practice.
Of course, no ideal strategy would fit every asset, timeframe, and instrument. So experiment. If one doesn’t suit your trading plan, try another. Sharpen the skill on a demo account so that the positive percentage of trades is 60-70%, and you start real trading. But remember that no strategy can give a 100% success guarantee, and trading is associated with significant risks.