How to be consistent and sustainable in forex trading?

Sustainability is key in this era. From the environment to wildlife, to corporate profits and sovereign growth, we seek consistency and sustainability in progress. We have seen how fast companies and traders can go from boom to bust, therefore it is important to finish the race well and not give up halfway.

In our experience serving traders and investors, automatic trading systems and robots have seen exponential interest recently. Wall Street calls this algorithmic trading. Commercial EA developers call them your ticket to retirement. But nothing can be further from the truth. Time and again we see people searching for EA after EA, also known as the search for the Holy Grail. The problem with this “trading approach” is that when you do not know what is behind the black box, you are not able to adapt to changing market conditions, causing you to run away once you start losing money.

The first step to sustainable forex trading is to choose a strategy:

  • That you understand (reliable strategy and you know how it works, how formulas and indicators areĀ calculated)
  • That fits your personality (long term or intra day)
  • That fits your schedule and personal commitments (8 hours a day or 15 mins a day)
  • That fits your trading capital (you can suffer the drawdown required for your system to be successful over time)
  • That you believe in (sound logical strategy, not simply a strategy which someone else says is good, but one that you can verify – at least visually)

The second step to sustainable forex trading is to give your strategy a chance. A good number to determine if your trading style and strategy works is 100 trades. If you stick to your strategy for 100 trades, you have a decent statistical pool to fine tune your strategy, or discard it if it does not work for you. The problem here is that most people give up on the system they designed the moment it suffers 10 losing trades. Keep your risk per trade under 2% and your trading capital will have a chance to make losing trades, keeping you in the game when winning trades come online. One way to stick to your system is to have good records and steps written down. “The best way to remain calm and preserve discipline is to keep good records. Write down your plan for the day ahead, put it next to the keyboard”-Dr. Alexander Elder

Finally, when you have selected a suitable strategy, and you stick to your system, you need to manage your risk. This will ensure that you stay in the game for the long haul; even as loses eat into your trading capital, you are able to recover. Many traders either due to greed or fear, increase their position size and risk per trade. Once they suffer a blow, it becomes very difficult for them to recover. Watch our risk management video tutorial here.

We encourage you to develop the trading skillset and mindset for long term sustainable trading – this is the key to consistency. Finish the race well!

 

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