By Rob Colville on August 26, 2013 in
Are you one of those people who has tried every forex strategy under the sun only to continue losing again and again, hand over fist? Face it, we’ve all been there. But what may surprise you is it’s probably not the forex strategy letting you down – it may simply be you.
Yes. You read right: You!
For many, it’s an inconvenient truth but the first forex strategy you probably traded in your trading career probably works just as well as the last forex strategy you traded with regard to it being profitable over all. Want to know why?
Let me explain. All rule based forex strategies out there work. If you only trade when your strategy tells you to, you will be eliminating the noise and chaos which occurs in the market until that point. After all, you should only trade when you do get a set-up based on your strategy and nothing else, right?
What makes a strategy successful is how it’s performed over a decent sample: of at least 20 trades or over the course of three months. And what makes a trader successful in trading a profitable forex strategy is his or her ability to stick to it, both sickness and in wealth!
But a lot of amateur forex traders don’t know about what they don’t know. They don’t “get” variance: how wins and losses in any strategy are random and disproportionate. So they jump from strategy to strategy like a frog that jumps from lily pad to lily pad.
They may have unknowingly started trading a reasonably profitable strategy in the middle of a drawdown phase, got fearful after losing two trades, and moved onto the “next best thing” only to discover that through doing that they have taken themselves out of the flow of opportunity and out of the running to benefit from a string winning trades.
Unbeknown to them, their new forex strategy of choice has just also entered a drawdown phase and they then lose some more. To their horror, they look back at their original strategy to see that through ditching it for a this new one they have missed out on a string of winning trades that could have made good their original losses and netted them a decent additional profit.
By sticking to a single strategy you will be keeping yourself in its opportunity flow. Remember, winning trades from any strategy are like busses in London – they can arrive all at the same time or you may have to wait a while. As traders, it’s our job to stay in this flow appreciating that we need to be patient and disciplined in order to make a success of it.
Jumping from strategy to strategy is like a dog chasing its tail – while it may seem like the most pragmatic, combative thing to do at the time in preventing losses…it doesn’t actually get you anywhere! It could very well cause you to lose more money!
Choose a strategy which suits your personality and your availability to trade. Have faith in it! It will be your trading edge in the market. Remember how a strategy’s success is measured: give it a chance to perform over a sample of trades and a decent period of time. Don’t write it off after two trades.
So here’s the question: if you are trading, are you going to continue trading your current strategy?