Forex Strategy and Logic

DailyForex.com Team

By: Charley Warady

 These days, trading Forex successfully can be frustrating. Even though the Forex market seems to be trending upwards, it is going at a snail's pace and the trading range is ever increasingly tight. The market is not as easy to trade as it may look on your charts.

Forex Security

In these kinds of markets it is easy to fall into a false sense of security, so to speak. Because of the lack of range in the Forex market, it doesn't appear that the risk could be all that great. This is not necessarily so. In markets such as these, often times a Forex trader winds up cutting his profits short and riding his losses too far.

The phrase, “any profit is a good profit” is only applicable if, at the end of the day, you still retain profits. If your profit/loss ratio seems skewed, it's time to reevaluate your Forex trading strategy.

Forex Frustration

Don't be discouraged or frustrated. It is a common pitfall all traders fall into. Because the market seems “slow” a small profit seems large enough when it begins to wear on your patience. And the same is true while riding a loss.

The market is moving without any purpose, so it is easy to believe that it just might turn your way if you just ride it out for a few more PIPs. It may be a few more than you had originally planned, but in this slow market it might be worth the wait. And you sit there and watch the market slowly suck away the earnings of the previous profitable trades.

When you sit back and look at the chart of your points of entry and exit, you realize they are exactly opposite of what they should be. All in a slow market. All at a snail's pace.

Forex Discipline

Even more than in a regular market that ever-present necessity of that ugly word “discipline” comes into play in these trading ranges. If you keep in mind that it's the winners you should ride and the losers you should cut short, this Forex market can be a pleasure to trade. The news is having little effect on the trend and the institutional money is not bending the curves to its varied whims.

Remember that patience is a virtue only when it applies to profits. Just because you cut short a loss doesn't mean you're done for the day. It actually means a fresh opportunity for getting back in the market anew. A loss has to be treated like a bad golf shot. Forgotten. If you're busy beating yourself up over a not-so-great trade, your next trade is apt to look equally stinky.

The thought process of “if I would have just held onto it, I'd be even by now instead of a loss” is a fool's game. In essence what you've done is missed an opportunity on a new profitable trade in order to hold onto a loss simply to break even. It doesn't make sense. It doesn't make Forex sense. 

DailyForex.com Team
The DailyForex.com team is comprised of analysts and researchers from around the world who watch the market throughout the day to provide you with unique perspectives and helpful analysis that can help improve your Forex trading.

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