How To Approach Winning Streaks In Forex?
If you are reading this article either you are simply looking to prepare yourself for your next winning streak or you are currently in a winning streak and want to make sure that you manage your trading correctly. Either way, well done for reading this article so you know how to approach winning streaks in Forex.
To consistently make money in Forex your winning periods have to outweigh the losing periods. That means this is a two-phase process of controlling loses in unfavorable times and maximizing winning periods. Now we discuss the latter.
Following are the elements to keep focused on while on a winning streak:
1. Discover what you are doing right
Ask yourself what have you been doing right during the time of your winning streak? Did you find a way to improve your strategy and have been implementing it well or maybe you have stopped falling victim to psychological challenges of the market and that has allowed for greater profitability?
The key is to analyse your trading and see if you notice any patterns that you can then implement on a consistent basis to improve your results. A great way to follow this process is to compare your losing streaks to your winning streaks and see if any major differences jump out at you. By doing this you can take to lessons and apply them in your trading all the time.
2. Follow your strategy objectively
You have been making money, so don’t make major adjustments, no need to fix something that isn’t broken! It is easy to lose discipline when on a winning streak, since everything seems to be going your way, but stick to your guns and keep the rules of your approach on hand at all times to make sure you don’t break them.
Many traders are trigger happy when times are good, and end up taking borderline trades (where the odds are against them), trade in un-tested ways or overtrade. Don’t do this! Winning streaks end and losing streaks begin with this type of behaviour. Take your winning formula, then rinse and repeat.
Following your system involves executing and managing your trades according to the rules that you have set out. It’s not one or the other!
3. Don’t get overconfident
Remember that the Forex market is bigger and has far more money than you, don’t begin to believe that you are a trading God that can move the biggest market in the world. Respect the market and remember the pain that the market can inflict to avoid letting overconfidence sink in.
An important part in this is remembering that the market is a probabilities machine and inevitably you will also face a period of drawdown, keep your eye on the ball during the positive times so that you have money in the bank to pay for the bad times.
4. Stay within your risk limits
As a by-product of overconfidence, traders can push the accelerator too hard in profitable periods and crash into a barrier. Even during winning streaks losing trades will be present, if you risk too much on any trade or a series of trades then it is likely that all gains will be wiped out faster than you can blink.
Discipline by sticking to your risk limits is the only way to prevent this, risk management is important at ALL TIMES whether you are winning or losing. Keep a list of your risk limits to stay grounded and objective with your money and remember to cut those loses!
5. Continue to execute your processes
Extended winning streaks mean that you are doing something right, well done. Continue to execute your processes because they are leading to positive results. When you ask what you are doing right also consider the processes that you have been following to get the great results, and then continue to do more of the same.
This could include how you structure your time in a day, the processes you follow when analysing the market or other aspects outside of trading such as eating and exercising habits. Continuously following processes helps to extend the length and profitability of winning streaks.
Yes, positive times are good, but it is essential for all traders to executing what got them into a winning streak. By following the guidelines in this article, you will be able to take full advantage when the odds are in your favour.
Continue to make your wallet happy, rinse and repeat.