A Common Misconception About Forex Trading
When I first started learning about forex trading, I thought that all I needed to do to get rich was to find a winning forex strategy, and I think many newbies think the same way.
They will spend hours and hours reading forums, testing out different indicators and coming up with different strategies in the hope that one day they will come across the Holy Grail forex system.
However the reality is that the Holy Grail system or strategy simply doesn’t exist. Many strategies will work for a while, but there will be times when they will lose money, and there is always the possibility that they will become unprofitable when market conditions change.
Furthermore, one thing I have noticed in all my years of forex trading is that even if you do have a profitable strategy, it will not necessarily be profitable for everyone.
You can give the same winning strategy to three different traders and you can pretty much guarantee that they will achieve different results. Indeed one or two of these traders may even lose money using this seemingly profitable strategy.
So in the remainder of this article, I want to list some of the reasons why some traders still find themselves losing money with a winning strategy.
Unclear Profit Targets / Stop Losses
One of the main reasons why some people will fail to make money using a winning strategy is because the strategy in question doesn’t have clear profit targets and stop losses.
You will often come across some really good strategies online, but unless they have fixed exit points and fixed stop losses, it is often left to the trader to set their own, which obviously doesn’t guarantee success.
Lack of Experience
Another key reason why some traders are unable to generate consistent profits from a proven strategy is because they have a lack of experience, and don’t yet have the instinct to know when to enter a position and when to stay on the sidelines.
The truth is that you more you trade, you more you obtain a feel for the markets. Therefore a winning strategy is more likely to be profitable in the hands of an experienced trader than an inexperienced one.
Lack of Discipline
A trader with a lack of discipline may also struggle to be successful with a winning trading system. That’s because some people simply cannot accept losing trades, and don’t have the discipline to stick with a particular strategy through the good times and the bad times.
As a result of this, they may find themselves tinkering with a winning strategy in order to make it more profitable when it has had a few losing trades in a row, or find themselves deviating from the strategy and making their own trading decisions, neither of which is generally a good idea if a strategy has already proven to be successful in the long run.
Time Constraints
Time constraints can also be a problem for anyone following a particular strategy because if they are unable to be at their computer for long periods of time in order to spot the best set-ups, this can affect their overall profitability.
Time Differences
It can also be a problem if a particular strategy works best on one of the GBP or EUR pairs during the European trading session, for example, but a trader is located in a part of the world where it is not really possible to trade at this time.
In which case, they may try to apply this strategy to their local currencies or enter trades in advance, which may not necessarily be a success.
Final Thoughts
Hopefully you can now see why profitable trading strategies are not necessarily profitable for everyone who uses them.
There are many factors that affect how successful a particular trader will be, and whether or not they are able to strictly follow a winning strategy, and as pointed out right at the start of the article, even the most profitable strategies are vulnerable to changes in market conditions, which is why forex trading is so difficult.
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