{"id":15146,"date":"2018-05-15T08:18:32","date_gmt":"2018-05-15T15:18:32","guid":{"rendered":"https:\/\/www.tradingheroes.com\/?p=15146"},"modified":"2025-07-30T00:34:00","modified_gmt":"2025-07-30T07:34:00","slug":"3-stages-profitable-trading-strategy","status":"publish","type":"post","link":"https:\/\/www.tradingheroes.com\/3-stages-profitable-trading-strategy\/","title":{"rendered":"3 Stages of a Profitable Trading Strategy"},"content":{"rendered":"<p>Once in awhile, I get emails asking me to review a trading strategy (and tell the trader what's &#8220;wrong&#8221; with it).<\/p>\n<p>Most of the time, the trader is trading an Idea, not a Strategy. If you aren't familiar with the difference, then this post will show you how to tell.<\/p>\n<p>There are actually two stages that come before you have <a href=\"https:\/\/www.tradingheroes.com\/holy-grail-trading-strategies\/\">a proven trading Strategy<\/a>. You need to go through all three stages, in order to have a trading method that works and that you are confident in.<\/p>\n<p>If you choose to ignore these steps, you can end up spinning your wheels for years. I would like to help you avoid that fate.<\/p>\n<p>Here's how&#8230;<\/p>\n<h2>Stage 1: Idea<\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter size-full wp-image-15157\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/trading-idea.jpg\" alt=\"Profitable trading idea\" width=\"1200\" height=\"600\" srcset=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/trading-idea.jpg 1200w, https:\/\/www.tradingheroes.com\/wp-content\/uploads\/trading-idea-768x384.jpg 768w\" sizes=\"auto, (max-width: 1200px) 100vw, 1200px\" \/><\/p>\n<p>An Idea is a very general concept. It could be something like:<\/p>\n<ul>\n<li>&#8220;I notice that the <a href=\"https:\/\/truthaboutfx.com\/podcast\/ep42-whats-the-asian-drift\/\" target=\"_blank\" rel=\"noopener noreferrer\">Asian Drift<\/a> usually goes in the opposite direction of the actual trend for the day.&#8221;<\/li>\n<li>&#8220;Looking for a strong trend on the daily chart, then waiting for a pullback on the one hour chart looks like it would be profitable.&#8221;<\/li>\n<li>&#8220;Price tends to reverse at daily pivot points.&#8221;<\/li>\n<\/ul>\n<p><strong>However, some traders mistake these generalizations for a trading Strategy and start trading it in their live account. <\/strong><\/p>\n<p>That obviously never ends well.<\/p>\n<p>Don't get me wrong, the overall concept behind a lot of trading Ideas are sound. But if you don't test and apply them in a uniformed manner, you have zero chance of becoming consistently profitable.<\/p>\n<p>These simple Ideas could be traded in so many ways.<\/p>\n<p>That's why you need a Sketch&#8230;<\/p>\n<h2>Stage 2: Sketch<\/h2>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"aligncenter wp-image-15156 size-full\" src=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/sketching.jpg\" alt=\"sketching out a profitable trading strategy\" width=\"1200\" height=\"600\" srcset=\"https:\/\/www.tradingheroes.com\/wp-content\/uploads\/sketching.jpg 1200w, https:\/\/www.tradingheroes.com\/wp-content\/uploads\/sketching-768x384.jpg 768w\" sizes=\"auto, (max-width: 1200px) 100vw, 1200px\" \/><\/p>\n<p>Here's where things get interesting.<\/p>\n<p>An Idea is a general hypothesis on how to profitably enter the market. But a sketch takes it one step further and defines specific trade entry, management, exit parameters and more.<\/p>\n<p>Also consider:<\/p>\n<ul>\n<li>Will you scale in to the trade or only have one entry?<\/li>\n<li>Will you scale out of the trade?<\/li>\n<li>Will you add to a winning trade (pyramid)?<\/li>\n<li>Are there certain days that you should not be trading?<\/li>\n<li>How do you know if you should bail early?<\/li>\n<li>And more!<\/li>\n<\/ul>\n<p>To create a complete sketch from any trading idea, download <a href=\"https:\/\/www.tradingheroes.com\/forex-trading-plan-guide\/\">this free worksheet<\/a>. It will give you all the parameters you need to create your own Sketch.<\/p>\n<p>But you still are not ready to trade live yet&#8230;<\/p>\n<h2>Stage 3: Strategy<\/h2>\n<p>Once the Sketch has been proven in <a href=\"https:\/\/www.tradingheroes.com\/forex-backtesting-guide\/\">backtesting<\/a> and <a href=\"https:\/\/www.tradingheroes.com\/forex-forward-testing-guide\/\">forward testing<\/a>, then it is time to take it into live trading, with real money. If the Sketch holds up under live conditions, only then is it considered <strong>a proven Strategy<\/strong>.<\/p>\n<p>Anything else is just an Idea, opinion, rumor or untested Sketch.<\/p>\n<h2>Final Thoughts on Developing a Profitable Trading Strategy<\/h2>\n<p>So if you are losing consistently, ask yourself if you really have a <strong>Strategy<\/strong>, or if you are actually trading an <strong>Idea<\/strong> or a <strong>Sketch.\u00a0<\/strong><\/p>\n<p><em>There is a huge difference between the three of them.<\/em><\/p>\n<p>Once you understand where you are in the process, it's easy to move forward to the next step.<\/p>\n<p>But what if your Sketch doesn't test well? Keep testing different things or find a <a href=\"https:\/\/www.tradingheroes.com\/resources\/\">course<\/a> that can give you proven strategies.<\/p>\n<p>Just be sure that they match your trading personality.<\/p>\n<p>&nbsp;<\/p>\n","protected":false},"excerpt":{"rendered":"<p>A consistently profitable strategy is actually developed in three stages. This post will show you if you are making the mistake of trading something that is not a proven Strategy. <\/p>\n","protected":false},"author":2022,"featured_media":15156,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[204239],"tags":[735,201651,201657],"class_list":["post-15146","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-trading-education","tag-forex-trading-for-beginners","tag-forex-trading-strategies","tag-trading-for-beginners","generate-columns","tablet-grid-50","mobile-grid-100","grid-parent","grid-33"],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.1.1 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>3 Stages of a Profitable Trading Strategy - Trading Heroes<\/title>\n<meta name=\"description\" content=\"A profitable trading strategy is created by going through three basic steps. 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