Lesson #7: Structured Forex Trading Strategies Enable Progress
Once I was on my way and trading along, I hit times when it was difficult to know whether I was on track, heading the right direction or simply on the road to nowhere or worse. Times when the market’s in crisis can certainly bring up these thoughts. Most of us that have traded for a while have experienced these moments and the doubt that can be associated with it.
With too much choice and too much allowance for variation (discretion) in our forex trading strategies, it can be difficult to understand, identify and stick with a sound course of action.
An example of the temptation to change from my early days trading is when I had a good system I was using and it was going to plan. Then I saw someone else doing a great selling job on another method that was talked up to be better. I diverted my energies to try out the new strategy, only to toss it later when it wasn’t the magic answer it was made out to be.
This is a common trap for forex traders before they have the necessary experience to base their own decisions upon. Marketing can make some strategies more prominent and in your face but they are not necessarily the best or the most suitable forex trading system for you.
What is a structured forex trading strategy?
Strategies vary greatly with how much discretion a forex trader can have on trade selection, entry, in-trade management and exit. It ranges from totally free styling it by following your gut and what your mind tells you, to the other end of the spectrum where every decision and action is prescribed for you before you enter the trade. When you make all the decisions before the trade, I call it a structured forex trading strategy.
Many people who take up trading are highly intelligent and it may seem fine to assume some discretion in your trading. After all, surely we have something to “add” or “control” in the process. Our egos can convince us that this is the correct course of action. After all, our mind and brain’s may have made us ascend to great heights in other endeavours. So why wouldn’t they serve us well now?
A structured forex trading strategy is one where you design, plan and test all aspects of the strategy, and then once you’re executing the trading system, all the decisions are pre-determined and you are just following orders already made.
The creativity comes before the trade is entered. Once the trade is entered all decisions are already made and you act like a boring robot on a factory production line.
8 Benefits Of Structured Forex Trading Strategies With No Discretion
1. Separate what you can control versus what you can’t
We can’t control the outcome of each trade, but we can control our own actions. Having a structured forex trading strategy allows us to separate and manage the aspects of our trading that we can control.
We are then able to judge our performance on what we can control.
2. Helps us work out what to improve and manage because of defined actions
We are better able to performance manage ourselves to improve, by comparing what we did with what we should have done, and working to eliminate variations. It takes a structured forex trading strategy to clearly know what you’re comparing your actions against.
This enables a forex trader to transparently follow your forex trading strategy rules in a way that allows you to get up in the morning happy and clear about the decisions you’ve made and the actions you’ve taken ready for a new day of trading. This is irrespective of whether the forex market has been co-operative with your system and paid you.
3. Enables a trader to scale
Structured forex trading systems are scalable because our time can be eliminated from the execution process. When we’re not required to use our time, which is limited to 24 hours a day, we can ultimately run more trades and systems with a positive edge to turn our trading capital over faster for a greater return.
4. Able to be automated
Structured forex trading systems can ultimately be programmed and run without any time required from us to watch and wait for set ups and to enter the trades.
5. They can be tested more thoroughly
Structured forex trading systems can be back tested. This allows us to do some testing on the strategy to validate whether it’s likely to be profitable in the long term when run live.
We can monitor our actual results against our planned system results to check how well we realise the pre-tested edge.
6. No emotions when they are running high
Emotions run at their highest when we’re in a trade. Money fluctuations can do the most devastating things when we’re euphoric or can’t handle the pain of losing.
Structured forex trading strategies allow us to make the decisions before we enter the trade, when we’re more level-headed.
7. Reduces curve fitting
With discretion it’s easy to be influenced by our observations of the market in recent trades. This can cause a lot of motivation to slightly vary our actions to avoid loss or to make a bigger gain with the next trades.
This practice is called curve fitting. When you do that the market will usually prove you wrong and unkindly show you that you should have held firm and stuck firmly to your previous actions.
No trader can predict what’s going to happen next in the forex market. To think so is just foolish.
If we did know what was going to happen in the future, then we’d have a 100% accurate trading system. Some traders get close to 100%, but that’s by losing much greater amounts on the losing trades than they win on the winning trades. By taking a win incredibly early they increased their chances of the trade winning.
Using structured forex trading strategies is compatible with the truth that you don’t know what’s going to happen in the future.
The Way Forward For Progress
Using structured forex trading strategies with precise rules to follow and measure against provided me the clarity to progress my trading to a new level and beyond. It gave me a structure to monitor my own actions to help me progress faster to become a better trader and provided a basis for identifying how to improve my forex trading.
By using structured forex trading strategies we can obtain clarity from within the chaos and forge our way forward to achieve our goals.
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About the Author: I’m Rachel Hunter, TraderRach, a Forex Trader who helps traders achieve the life they love with forex. Be strategic and design your trading business for sustainable success and have fun! That’s my mission. Join many traders’ gaining the edge with “10 Powerful Lessons for Forex Trading Success” plus other goodies. Years of precious learning specially packaged up for you. My background before trading is as a Chartered Accountant and Chief Financial Officer. I know what it takes to make a trading business rock on. It would give me great pleasure to make a difference to your success.