Why you must stick to your strategy when trading forex
The most successful forex traders are those who stick with their strategy.
If you don't stick to your strategy, you'll let your emotions interfere with your decisions and it makes it much harder to evaluate your performance.
Let's take a closer look at why following a strategy is key to forex trading success…
The impact of letting emotions drive your forex trading decisions
It can be difficult to ignore your emotions when you trade forex
The two main emotions you need to contend with are fear and greed.
Fear may stop you from trading in the first place. Once you get over this fear, you’ll worry about losing money.
Greed can lead you to overtrade as you chase big profits.
There’s no doubt about it, emotions can play havoc with your trading. The best way to overcome them is to stick to your trading strategy.
You know when you should enter a trade;
You know when you exit a trade; and
You keep your emotions at bay as you follow your strategy no matter what you feel about a trade.
You can easily measure your performance if you follow a forex trading strategy
By sticking to your trading strategy, you also give yourself a way to measure your performance. If it’s not working, you can change it.
That’s why it’s vital you keep a record of all your trades. Then every month evaluate your performance.
Your trading record should include:
The date, time, what currency pair and whether you went long or short;
The price you got in the trade at;
How many pips your stop loss was from your entry price;
What price you exited the trade;
The time you were in the trade; and
The profit or loss in pips from the trade.
When you evaluate your performance, you want to check your win rate. And how much you are up or down overall.
A spreadsheet is the easiest tool to use for this. You can add in a comments column too to add in any extra information about the trade.
By using your trading record, you can evaluate when things go wrong better. Maybe it’s a particular currency pair that doesn’t work well with your strategy. Maybe it’s a certain time of day.
So there you have it. Why you must stick to your strategy when trading forex.