Forex: Keeping the Faith

Filed under: Learn Forex Trading |

 

Being a forex trader is all about keeping the faith – the faith in yourself, your system or methodology, and your judgement. If you do not have faith in these three things, then you will inevitably fail; because every time you have a bad run of trades (and you will), you will start to tinker with your system/methodology, and this is a guaranteed way to get on the road to failure.

 

For example, if you start to become more conservative after a period of drawdown, this can be extremely damaging to your trading bank. Let’s say that you lose 10% of your bank, and you start to feel the pain, and you change your risk level from 1% of your original trading capital per trade to 0.5% per trade. What happens now is that in order to make back the money that you lost, you now what to have double the amount of winning trades that you would have had to have if you had not changed your risk levels.

 

Another thing you might do is to stop trading a particular kind of setup because you have had a few bad ones in a row. Then you miss the good ones, and realise that you are missing the good ones, and start trading the setup again. And then the bad ones come… and the cycle continues! If you find over a long series of trades that a certain kind of setup is not profitable, then by all means alter your system. However, I think that reviews should be done on an annual basis, and that any short-term decisions should not be made.  Have a yearlong plan and stick to it. If at the end of that year, something is wrong, then change it, and make a new yearlong plan. Keep the faith in yourself and your system, and see the project through.

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