Why does Your Forex Trading Strategy Fail After a While
Why does your Forex trading strategy fail after a while, This is a question that has baffled many new traders. In this article, we would find out why this is a common phenomenon and how you can use it to your advantage in the Forex market.
The journey of a Forex trader is not an easy one, you start off with zero knowledge in the market, and attempt your best possible to get a Forex trading strategy that works. You finally find one after hours of search, beaming with enthusiasm, you begin to implement this strategy in the market.
It works perfectly for a while, and then disaster struck! No matter what you do? No matter your best efforts, the strategy that once made you money, has now proven unprofitable? Why does this happen to new Forex traders, and how can you take advantage of the situation to your benefit.
We have all been there, a Forex strategy that made you money last week is now performing abysmal, despite your best efforts. Why does your Forex strategy fail, despite giving it your all?
Types of Market Conditions
There is no foul proof Forex trading strategy out there. Every strategy, one way or the other would have some down times. The difference between a successful trader and a struggling trader is primarily due to how they manage the risks during the down time.
- The trending market
- The ranging market
Any strategy you come across would either work best in either of these market conditions, for this reason, a strategy that worked perfectly well last week, may struggle to become profitable this week, should market conditions change.
Second, each market condition has its own unique way of trading it profitably, the problem is that it is often difficult for the new trader’s to know or even be aware of which market condition they are currently operating in.
If you apply a range trading strategy in a trending forex market, chances are that you would blow your account and wonder if Forex trading is a scam.
How to Avoid Failure when the market conditions change
If you do not learn to trade Forex like a professional, you may keep wondering why your forex trading strategy fails after a while, you may keep jumping from strategy to strategy, committing forex trading strategy polygamy (pun intended).
Hopefully, you may pick a point or two here that you can use in your career as a trader to avoid these pitfalls.
- There are 3 market sessions that run 24 hours in the Forex market, each market has its own characteristics. The Asian session, the London session, and the New York session all have unique trading characteristics.
- Asian sessions are best known for their calm nature, and market consolidating, this gives room to trade your ranging strategy.
- London session is often characterized by volatility, it is so common, there are specific strategies geared towards the breakout that happens during the London trading sessions, popularly called, London breakout.
- London often trends, trading a ranging strategy in a London session is often not a good idea.
- New York session set’s the general tone for the daily candle close, New York often trends.
Having identified all these, do you know what kind of strategy you are trading with? if no? worry not. Go back and review your trade history, identify which market conditions gave you the most wins, and which resulted in losses.
If you made more losses during the Asia session, you are most likely using a trend following strategy, otherwise, you are using a ranging strategy.
In this video, we speak in detail about why this very common phenomenon, why it happens, and how you can deal with it to become a successful Forex trader.
What has been your experience? Let us know in the comments