Forex: Taking a Long Term Approach is Essential

Filed under: Learn Forex Trading |

 

Today, I am going to explain how taking a long-term approach in forex trading is really essential. To begin with, let’s take a look at my trading performance since June 2011 (so one and a half years of trades) by taking a look at Figure 1. What you can see here is a number of peaks and troughs. The peaks represent elation and optimism, whereas the troughs represent despair and pessimism – and I can tell you that I felt every one of these peaks and troughs. When you feel emotional about trading, having a long-term equity chart can put a lot of those emotions at bay because you know that another peak or trough is going to be just around the corner.

 

In one and a half years, I have taken about 325 trades. That is just over one trade every couple of days. At times, I know I have overtraded and looked for setups that are not really though. And I also know that at other times I have been lazy and disorganized and missed one or two great setups that should have been taken. So when looking at the big picture, there are always one or two things that you can do to improve your trading performance.

Figure 1.

One of the most important things you can do is have a long-term money management plan. It is no good increasing your risk after a good month and then decreasing your risk after a bad month. It is much better to keep your risk levels the same throughout the year, and then perhaps revaluate your risk level after a full year of trading, based upon your long-term results. Overall, I am currently up around 38% on my bank over a period of one and a half years, with a biggest drawdown of around 15%. Based upon this drawdown level, I could probably double my risk, which would have made gains of 76% and a maximum drawdown of 30%. These are decent figures, and as such, I will be continuing to do what I have been doing for the following year.

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