If you’ve spent enough time around forex trading forums, then you’ve doubtless encountered a trader or two who say that they’ve made consistent pips using just one trading system.
But you’ve also seen others who can’t seem to replicate the OP’s stellar trading performance. In fact, this is probably the case more often than not.
Don’t worry; this is not because the OP is selling a get-rich-quick scheme. Well, at least I hope not.
Instead, it’s more likely that the OP had used his/her strategy at fortunate time when the set of rules worked well with the trading environment that he/she used it on.
Traders usually spend tons of time tinkering with indicators, parameters, and trading rules without giving much thought to how long they might work.
Take a basketball game, for example.
Team Blue has prepared to go against Team Red by breaking down the individual players’ stats and analyzing their usual plays. They’ve made allowances for errors but they also generally expect the odds to tip in their favor.
Winning against Team Red means identifying which plays they’re executing and making adjustments for it. Not at the end of the quarter, but as soon as possible.
Likewise, the best way to keep Team Red on its toes is to switch up the players and strategies as soon as Team Red has caught on to Team Blue’s plays.
Forex trading has the same principle. If you want to be consistently profitable, then you’ll have to be profitable across different trading conditions.
So, how can you be profitable in any trading environment? Here are a couple of tips.
- Spend as much time as you can studying price action.
Nothing beats experience. While backtesting will go a long way at pointing out strengthening and weakening market and indicator correlations, your experience will also be useful in identifying the earliest signs of change in trading conditions.
Are bulls taking back enough control to end a trend? Or has a market catalyst inspired a breakout from tight ranging conditions? Has a moving average crossover finally failed to herald a change in trend?
Don’t hesitate to use a trading journal to help you remember your observations.
- Try both discretionary and mechanical trading
While mechanical trading works for a lot of traders, the systems also only work as long as you’re using the right tools in the right environment.
This is where discretionary trading comes in. Remember that your profitability hinges on how fast you can adapt to changes in trading conditions.
But since a lot of systems tend to use lagging indicators, you’ll need your experience and discretion to identify and take advantage of market changes.