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Talking Points:
Expectations vs. Results
Clarify your Edge
Is Your Edge Still Working?
Adjust if Necessary
Trading the Forex market can often feel like a lone venture. Most traders are not on a bank desk or proprietary trading floor. Rather, they are at home at their office trying to withdraw their profits from the $5.4 trillion Forex market. Because of this, when a trader has their time of doubts as to whether another strategy is working and if it is viable it’s important to ask if they are on the right track.
Here’s a walk-through on how to know if things are working and what you can do as a trader if they are not.
Expectations vs. Results
Because Forex trading is often a lone sport, many traders don’t know if their expectations or strategy are on track. Other traders fully lack well-defined expectations and possibly trading rules and are only left to look at the results, which can be disheartening if they were expecting wildly successful results out of the gate when he started trading Forex live.
However, an easy trap many traders fall into is to have undefined rules and unrealistic expectations. Instead traders should learn to roll with the punches in terms of results while holding fast to defined rules for their trading. Because markets are admittedly unpredictable, expecting specific returns can be dangerous and lead to risky behavior like revenge trading were over leveraging in order to hit a possibly unattainable return depending on the market environment. Defined rules for entering and exiting a trade are often known as your edge.
Clarify your Edge
An edge is often defined as your rules for entering and exiting a trade. As you can imagine, this is something that should continually be refined over the years.
Refining is a process of learning what a true signal is and what is simply noise. Noise is often market moves or news that may have trapped you in your earlier years of trading and is likely trapping new traders to the market.
If you do not like the results you are getting, looking to see how your edge is working is a good place to start.
Breaking down where your edge is not working is critical. While poor money management can run the effectiveness of a good edge, there are many other factors that could affect the efficacy of your edge.
Is Your Edge Still Working?
Sadly, many traders don’t ask themselves the question, 'Is my edge still working?' Often, they don't ask because they’re afraid of the answer and that the answer would be no and it’s the only edge or trading strategy they’ve ever used or comfortable using. And how to flip the switch from demo to live trading, we discussed having multiple edges to bring to the market based on different market environments.
In other words, a trader with one approach to the multifaceted Forex market is not unlike a carpenter coming onto a work site with a simple screwdriver. The screwdriver may be effective if met with the right type of screw but for more than 80% of the required work, the carpenter will be an effective without the right tool. Similarly, think of your edge or strategy as a tool you bring to approach a specific market whether it is trending, range bound, or volatile/breakout prone.
Adjust if Necessary
One of the key marks of maturity in the market is when a trader is able to adjust their edge. Similar to in a business cycle where one approach works now that would work in a different part of the business cycle, traders should have strategies or edges that work now it won’t work later or wouldn’t have worked in the prior environment. This is no different than earlier mentioned carpenter realizing their screwdriver wouldn’t take care of the nail and pulling out a hammer. Once you have the maturity to drop your ego around a strategy and bring a different strategy to the market you often find it easier to be on the right track with your trading.
Happy trading!
Expectations vs. Results
Clarify your Edge
Is Your Edge Still Working?
Adjust if Necessary
Trading the Forex market can often feel like a lone venture. Most traders are not on a bank desk or proprietary trading floor. Rather, they are at home at their office trying to withdraw their profits from the $5.4 trillion Forex market. Because of this, when a trader has their time of doubts as to whether another strategy is working and if it is viable it’s important to ask if they are on the right track.
Here’s a walk-through on how to know if things are working and what you can do as a trader if they are not.
Expectations vs. Results
Because Forex trading is often a lone sport, many traders don’t know if their expectations or strategy are on track. Other traders fully lack well-defined expectations and possibly trading rules and are only left to look at the results, which can be disheartening if they were expecting wildly successful results out of the gate when he started trading Forex live.
However, an easy trap many traders fall into is to have undefined rules and unrealistic expectations. Instead traders should learn to roll with the punches in terms of results while holding fast to defined rules for their trading. Because markets are admittedly unpredictable, expecting specific returns can be dangerous and lead to risky behavior like revenge trading were over leveraging in order to hit a possibly unattainable return depending on the market environment. Defined rules for entering and exiting a trade are often known as your edge.
Clarify your Edge
An edge is often defined as your rules for entering and exiting a trade. As you can imagine, this is something that should continually be refined over the years.
Refining is a process of learning what a true signal is and what is simply noise. Noise is often market moves or news that may have trapped you in your earlier years of trading and is likely trapping new traders to the market.
If you do not like the results you are getting, looking to see how your edge is working is a good place to start.
Breaking down where your edge is not working is critical. While poor money management can run the effectiveness of a good edge, there are many other factors that could affect the efficacy of your edge.
Is Your Edge Still Working?
Sadly, many traders don’t ask themselves the question, 'Is my edge still working?' Often, they don't ask because they’re afraid of the answer and that the answer would be no and it’s the only edge or trading strategy they’ve ever used or comfortable using. And how to flip the switch from demo to live trading, we discussed having multiple edges to bring to the market based on different market environments.
In other words, a trader with one approach to the multifaceted Forex market is not unlike a carpenter coming onto a work site with a simple screwdriver. The screwdriver may be effective if met with the right type of screw but for more than 80% of the required work, the carpenter will be an effective without the right tool. Similarly, think of your edge or strategy as a tool you bring to approach a specific market whether it is trending, range bound, or volatile/breakout prone.
Adjust if Necessary
One of the key marks of maturity in the market is when a trader is able to adjust their edge. Similar to in a business cycle where one approach works now that would work in a different part of the business cycle, traders should have strategies or edges that work now it won’t work later or wouldn’t have worked in the prior environment. This is no different than earlier mentioned carpenter realizing their screwdriver wouldn’t take care of the nail and pulling out a hammer. Once you have the maturity to drop your ego around a strategy and bring a different strategy to the market you often find it easier to be on the right track with your trading.
Happy trading!
