Are you suddenly feeling “out of sync” in the Forex zone?”
When you have perfected your trading system, and it is working well, confidence follows, and everything will be going your way. Then suddenly, your strategy seems to be fighting against you, and you can experience a number of losing trades. It can be frustrating when everything was going so well, and you studied, backtested, used demos and followed all your planned steps.
Even professional Forex traders can be unprepared for these depressing events. Losing streaks can demolish your confidence levels, and multiple losses can play havoc with your decision-making process. However, they are an intrinsic part of Forex trading, and they should have a positive impact on your system and your psychology.
So, what is the best way to deal with these losing streaks and help to avoid them?
Stop The Trend
If you experience 3 or more losing trades, then it’s important to take a complete break. Stop trading and focus on something else for a complete cycle, so that you can gain perspective and a positive train of thought. Enjoy things that are not related to trading and resist the impulse to check the markets. When you return the following day, review your system and trading rules, but do not trade. Take your time in studying and refreshing your frame of mind and trading system.
Use Your Trading Journal
The importance of your trading journal is that it allows you to compare your current losing streak with previous ones, and all the individual trades that contributed. It should contain your trade data and the psychological aspects, allowing you to track your state of mind too. There is every chance that you will identify common issues or psychological factors linking the losing streaks. Always utilise your journal as it will help to maintain your focus and stop you from trying to recoup your losses or repeating mistakes.
Analyse The Detail
When you analyse the individual losing trades you should ask these questions:
- Was the trade setup high quality?
- Was I overly optimistic about the outcome?
- Did I stick rigidly to my rules and system?
- Did I apply correct money management?
After this, you should be able to identify:
- If the losing streak was within your system parameters.
- If you were oversimplifying or ignoring your own rules.
- If psychological factors led you to ignore your system.
- If you backtested and completed enough demos.
Always remember that “tweaking” your system is the last resort, as the issues are generally related to the trader, and not to flaws within the system itself.
Positive Risk-Reward Ratios
Forex as a business requires returns on investments, so positive risk-reward ratios are critical. They ensure you are always aiming for a higher return than your risk on each position. Your trading system should tell you the exact probability of a good return on your risk, so structured management is critical. If you stay focussed and disciplined, you will eventually see your trades hit your target, and one well-planned trade can even wipe out all the losses from a losing streak.
Have Faith In Your System
Trading with a system that you can rely on and put your faith into is very important. Any trader needs confidence in their trading strategy to be able to maintain a positive outlook and emotional health. These losing streaks can make you doubt yourself, but no strategy can ever achieve 100% success, as the Forex market is both dynamic and volatile.
Your trading system should not follow trade alerts without fully understanding how these are derived. It should always be based on a logic that you are confident in and can fully understand. This way, you can quickly identify high-quality setups and make decisions without hesitation or fear.
Trading Is Not An Exact Science
Losing streaks are entirely normal in any Forex trading system, as it is primarily based on probabilities and statistics. Part of being a successful trader is to accept these periods of losses and learn how to deal with them effectively. If you can use them to your advantage by understanding their recurrence and reasons, then you will start to see them as positive events. This will stop you panicking or making rash decisions on trades that are not clearly aligned to your trading system and strategies.
Most importantly, never be tempted to give up. Each trade is independent, so even if you have suffered losses, it does not mean your next trades will follow suit. They could be winners. Try not to become anxious or fall prey to panic decisions in your trading. Above all, maintain trust in your strategies, stay disciplined and patient, and have realistic expectations. Losing streaks in the Forex market is to some extent part of the trading package, and it’s your attitude and how you respond to them which really matters.