Taking A Break From the Markets

Filed under: Learn Forex Trading |

Screen shot 2013-07-01 at 10.13.48I have recently had a break from trading the forex markets, and I have to say, I have come back feeling refreshed and seeing the charts much clearer. In fact, I can positively say that I have missed looking at my forex charts (I know, I know, that does sound a little sad)! I would even go as far as saying that the charts have a certain beauty and artistic value. After all, they are a reflection and a depiction of mass psychology on a worldwide scale. Anyway, the point of this article is to explain that, sometimes, we can overtrade and look at our charts too much, and taking a periodic break from trading could be beneficial to your annual profit/loss figures.

 

If you look at your charts too much, and become too preoccupied with trading, then the charts can begin to look a little messy. In fact, you might add so many indicators and overcomplicate your trading to such an extent that they do start to resemble a Jackson Pollock painting! However, by stripping your charts of indicators, and taking a break from trading and coming back refreshed, you may begin to see things in a different and much more simplistic light.

 

Taking a break from trading also refreshes your enthusiasm for trading. As such, the 6% rule outlined by Alexander Elder in his book ‘Come Into My Trading Room’, takes on new significance. He proposes that if you experience a drawdown of over 6% in any one month, then you should stop trading until the following month to give yourself time to refresh and come back enthusiastic and in the right frame of mind. This seems like a good strategy. However, it would take a great deal of discipline to enforce this rule independently.

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