Writing for Cash Online

Forex winning Formula
Friday, October 19, 2007

Too many new traders spend time developing an approach to trading based on historical data and then when they use it live for the first time and lose, they throw it away thinking that it doesn't work. The fact may be that the approach is solid, but it is our expectations that are not realistic. We shouldn't expect to win every trade. Some of the best traders in the world win on less than half of their trades. But they also know that after a series of trades, because of sound money management they can expect to be profitable. This is because they are consistent in their approach, so they expect some consistency in their results.

When developing a new strategy, you have to judge it's effectiveness through different market conditions. This means that you have to see how it works when the market is trending up, trending down, in a range bound situation and also when the market seems confused and direction less. This may mean running through 100 practice trades to get a good feel for the strengths and weaknesses of the approach.

Just because that approach loses three trades in a row, it does not mean it doesn't work. If you and I were flipping a coin where I won on heads and you won on tails, we know that we would each win on about half of the flips. But if tails came up three times in a row, that does not mean that there is something wrong with the coin, it is just chance. We would still know that after a series of 100 flips, we would each still have won and lost about half of the flips. Think of this as you are working on ways to trade the market. Don't be too quick to judge that approach on a small number of trades. Think long-term when evaluating and then if the results are acceptable, be consistent in taking the trades and your trading results will also start to show some consistency.

Posted byForex Trainer at 9:18 AM  

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