The Forex Trading Strategy to Avoid Mistakes

Do you have a forex trading strategy that you religiously adhere to?

What is your biggest business mistake?

Do you have a trap that you fall into over and over? Mine is knowing when to stop.

I love making money from my trades, but even more, I love trades. I suspect that, as you read this, you are too. So how do we know when to stop? We need to apply some discipline.

Firmly apply the following forex trading strategy to minimize your losses

When to cut your losses

Opening a trading position is easy: look for your signals, decide your risk and press the button.

Knowing when to close is considerably more difficult.

How do we know if we really should close a position or if we are simply suffering from a case of trader nervousness?

Let’s say you entered a long trade and the value of that instrument has skyrocketed, leaving you definitely uncomfortable.

Jumping out of this position now is what a player could do.

But we are traders, not gamblers.

Take a look at the setup that got you to this position in the first place – what was the story that led you to buy? Whether it was based on technical or fundamental aspects, or both, there should have been a signal that led him to open this trade.

Do these signals still exist or has some news or technical indicator denied them?

For example, perhaps the price has fallen through a major support level that was part of your setup. Or maybe your trade was based on fundamentals and earnings figures that were worse than expected have been released.

These are the reasons to cut your losses.

If, on the other hand, the story that led you to this trade is still current, then you should stick with your position.

Let’s say you bought a stock that you thought was undervalued. Meanwhile, the price dropped. Unless some evidence emerges that your original valuation was faulty, there is no reason to exit this trade.

That is not to say that you allow your losses to drag on indefinitely. If the losses you are taking on a trade become excessive relative to your portfolio size, you should close that trade (hopefully with strong money management and a sensible stop loss, you don’t have to hit this value). stage – more on automatic stops in a moment).

When to close a winner

It can be just as difficult to know when to close a winning trade, although it is generally a more pleasant problem.

Let’s say you have a trade in place that makes a profit, but somehow languishes with respect to your profit target.

As with a losing trade, we have to look at the setup that got us to that position in the first place. Is the story still valid or has something happened to cancel out those signs?

If a crucial part of that story has changed, then we should consider closing that trade and taking our profits off the table.

And, just as it is important that we do not allow our losses to become excessive relative to our portfolio, neither should we be sitting on huge unrealized gains. Your profits and losses on open trades are real money; don’t fall into the trap of leaving them floating in the ether, vulnerable to greater risk.

The time factor

The time it takes for exchanges to unfold can be torture. Trading involves an infinite amount of patience, in addition to nerves of steel.

However, we must not ignore the time element of our operations as simply a necessary evil.

The longer our money is tied up in an exchange:

– the longer the money is at risk in the market;

– the less time we have to use that money in other investments;

– the higher our financing costs will be.

Before entering a trade, you should have considered a time scale that you will give that trade to unfold.

You don’t want to waste a lot of time waiting for your trade to reach the last points of your profit target; sometimes it is better to take your profits and move on to the next trade.

Remember: trading means keeping your money working hard for you.

Automated systems

I have not yet mentioned the value of automatic stop loss and profit targets to control our trades for us.

The fact that you can open a trade and stipulate what profit or loss it will be closed at is a great way to manage your positions and eliminate some of the emotional bickering over whether to hold or close.

I use stops and targets in most of my trades. Sometimes no more parameters are needed. However, most trades can benefit from additional management, and that’s where discipline, nerves of steel, and patience come into play.

Stops and personal goals

Similar to a trading platform, your trade closes automatically when a certain level is reached; I have my own trading levels that I will stop trading at.

what do I want to say with that?

Well, for each session trading, I have a personal profit goal in mind and I imagine that I am willing to lose. Once any of those levels are reached, I log out of my trading platforms and get on with the rest of my day.

This regimen prevents me from falling into patterns of behavior where I bet my winnings in the belief that I am “on a roll”; or go deeper into the red trying to recoup losses.

It also allows me to have a life outside of the commercial screen, something my family appreciates!