Obviously, you have to think about having your trading strategy changes when you are already losing money. Yet, you must be careful in deciding when to do this.
You may have failed the first time you try the technique but it may still work. Maybe the second time you use it is what it needs to be proven successful. Or perhaps, it only needs a few adjustments. And there just might be a time that you have missed the perfect opportunity to make use of your forex strategy. This does not indicate that the technique will not function, but the result may not just be as immense as you anticipated.
The main thing that you need to put in consideration is the risk-reward ratio. In simple terms, it is the amount that you’re willing to risk to gain. Preferably, your risk must be small and reward must be large. Yet it also relies on the income that you have.
Your risk and your reward must never be the same. The reward must never be lower than the price at risk. The trade is more risky when these two numbers are closer.
A small range of prices should already be considered risky. Do not risk too much money for a few pips. Look for greater rewards with lesser risks, instead. Will it be worth your energy and time risking $50 for $5?
A lot of professional traders will never recommend chasing an earning for just a few pips. They consider it a failure if they gained 50 or lesser pips. They lost money in a way because they weren’t able to earn the amount they were anticipating.
If the forex market becomes very dormant, then the movements of the currency pairs may not be worthy of the attempt to take advantage of. The earnings will likely be so little and you’re growing the possibilities of losing money.
Strategies Should Be Modified Considering the Market Status
The concept of your strategy can remain roughly the same, but you have to reassess your objectives as the market changes its volatility. Particularly, at what point or price you are buying or selling. To be able to do this, you must look at the charts, watch the news and read articles that will make you be updated on how the currency market is going.
Though, there will be a time that you will observe how your strategy needs to be changed or modified because some things did not take action. For instance, you placed a buy order and days later did not meet your target but value. It is best to close it, reassess the market and come about with a new and better strategy.
Your strategy may not be the only aspect that needs evaluation because perhaps, during those days when you traded, the market conditions are not favorable. And market conditions are more likely to change every hour, or even minute.
The more you trade, the more see the parts of your forex trading strategy that works and don’t. remove the unnecessary features and restructure your approach.
The best method to learn how to properly use a certain strategy, modify and master it is to keep track of your trading progress. Do this by providing a journal so you can evaluate whether the strategy you used was effective, and make applicable changes.