Taking a Long Term View

Filed under: Learn Forex Trading |

Looking at your trading progress on a daily, weekly, or even monthly basis can sometimes be counter-productive, as you can get obsessed about the natural drawdowns during the ebb and flow of your equity curve.  You may have a certain target in mind for your monthly profits, and if you are not reaching that target then you may start to overreach and make trades that you really shouldn’t be. It is probably best not to review your profit/loss figures too much except on a quarterly basis. Three months is a decent sample of data to look at, assuming that you make an average of at least five or six trades per week; so after a duration of three months, you should have a good idea of how well you are trading.

 

A drawdown of say, six or eight percent can sometimes feel like the end of the world to new traders and can really dent your confidence, but these kind of drawdowns are a part of the trading process and must be viewed as a simply the cost of doing business. Of course, if your drawdown gets really large in a single month, such as fifteen or twenty percent, then you really should start to worry, as this would represent significant damage to your trading bank and you should perhaps review your methods and results to see if you are doing anything wrong.

 

In summary, drawdowns of any nature are always hard to take, but with experience, they get easier to handle. When your confidence is grown over a long period of time, it takes more than a minor drawdown to significantly knock it, so rest assured that as you get more experience, trading will get easier and less painful. It is so important to try to control your emotions when trading forex, and experience and ‘screen time’ will help you to do exactly that.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>