If youve spent enough time aroundforex trading forums, then youve doubtless encountered a trader or two who say that theyve made consistent pips using just one trading system.
But youve also seen others who cant seem to replicate the OPs stellar trading performance. In fact, this is probably the case more often than not.
Dont worry; this is not because the OP is selling a get-rich-quick scheme. Well, at least I hope not.
Traders usually spend tons of time tinkering with indicators, parameters, and trading rules without giving much thought to how long they might work.
Take a basketball game, for example. Team Blue has prepared to go against Team Red by breaking down the individual players stats and analyzing their usual plays. Theyve made allowances for errors but they also generally expect the odds to tip in their favor.
Winning against Team Red means identifying which plays theyre executing and making adjustments for it. Not at the end of the quarter, but as soon as possible.
Likewise, the best way to keep Team Red on its toes is to switch up the players and strategies as soon as Team Red has caught on to Team Blues plays.
Forex trading has the same principle. If you want to be consistently profitable, then youll have to be profitable across different trading conditions.
So, how can you be profitable in any trading environment? Here are a couple of tips.
Nothing beats experience. While backtesting will go a long way at pointing out strengthening and weakening market and indicator correlations, your experience will also be useful in identifying the earliest signs of change in trading conditions.
Are bulls taking back enough control to end a trend? Or has a market catalyst inspired a breakout from tight ranging conditions? Has anSMA crossoverfinally failed to herald a change in trend? Dont hesitate to use atrading journalto help you remember your observations.
Whilemechanical tradingworks for a lot of traders, the systems also only work as long as youre using the right tools in the right environment.
This is where discretionary trading comes in. Remember that your profitability hinges on how fast you can adapt to changes in trading conditions.
But since a lot of systems tend to use lagging indicators, youll need your experience and discretion to identify and take advantage of market changes.
Once youve confirmed a change in trading environment, its important that you quickly change gears and adapt to it. This means youll always have to be ready with more than one play in your playbook.
Backtesting different time frames, indicators, and trading conditions will help you expand your playbook. More importantly, (successful) results from previous backtests will increase your confidence about jumping to another strategy and prevent a myriad oftrading psychology-related trading mistakes.
Just because a strategy has yielded you pips for days doesnt mean that it will do so for the next couple of weeks. Be ready to switch your strategies as soon as your parameters call for it.
Just as basketball players dont shout their intended plays to the opposing team, you also wont know WHEN market conditions will change.
But if you practicegood risk management habits in each and every trade then you can afford to be stuck with an open position that used an old strategy while trading conditions are changing.
Just make sure that you use the appropriate strategies in your next trades!
Remember that forex trading is an ever-changing jungle that cant be successfully navigated through with a single set of tools.
If you want to be consistently profitable, then you cant expect a single set of rules to ALWAYS work in your favor. Be ready with different strategies and be flexible in using them.
If you cant keep your emotions in check when trading, you will lose money. Lots of it. The most significant action that you can do to improve trading profits is to work on yourself. Really knowing yourself and how you think can give you an edge that others in the market dont have. My goal is to share practical advice to improve your forex psychology without boring you to death. Hopefully, you can develop the mental edge you need to become the best trader you can be.
Success is getting what you want; happiness is wanting what you get.Ingrid Bergman
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