Forex Trading Lesson: Trust Your Trading System

Forex Trading Lesson
In this week’s Forex video I will start with a Forex trading lesson. Pay close attention. This lesson is a lesson all traders need to know! A lot of traders/investors look for new Forex trading systems when they enter a drawdown. Are you one of those traders? If so, watch this week’s video, and I will show examples of all my Forex trades that I placed this week. I will not only show you my drawdown and how I overcame it, but I will give you tips on overcoming your drawdown when it happens.

Forex Trading Lesson: The Drawdown

This week, my trading started out with what could only be called a disaster. As a result of all potential set-ups failing to meet my entry or risk requirements, I did not place a single trade on Monday. Tuesday I was hoping for a better outcome. I placed four trades. One was good for + two pips (the breakeven rule set applied); however, three were losers. I teach traders to use 1% risk or less per trade. So at this point, I was down 3% for the day. Not exactly the rebound I was wishing would take place. Looking at percent profitable I was at a 25% win/loss ratio. Again, this was not ideal. Usually, at this point, a lot of traders would start to second guess their trading strategy or their abilities. But, before you start looking for new strategies or worse, throwing in the towel altogether, let me introduce you to backtesting.

Forex Trading lesson: Backtesting

Before you ever place a live trade, you should always backtest the Forex trading strategy that you plan to use. I highly recommend backtesting using a large sample size of data, such as months and years, not just a couple of days or weeks. Backtesting your trading strategy will allow you to see the drawdowns as well as your winning streaks. You will also see how the system handles different market conditions and this will give you the confidence to trade during the drawdown periods. I use Ninjatrader for my backtesting. Ninjatrader is FREE for simulated trading and to use their playback feature that allows you to trade historical data in real time. In my new Forex trading course, coming soon, I cover backtesting in great detail along with a spreadsheet to track your performance. Just remember, trading is a simple numbers game and nothing more.

Forex Trading Lesson: Becoming Profitable

So was I able to bounce back after Monday and Tuesday? Was I profitable at the end of the week? The quick and simple answer is yes! The signals generated a 5% gain after being down 3% on Tuesday. All my trades are being placed using the semi-automated software that I developed, so I am still trading a smaller position size, and therefore, I was not up 5%. However, I plan to start trading my full position size at the beginning of January 2017, and I am very excited about doing this. My Forex trading course will teach you the precise rules that my software follows.

As I discuss in this video, my win/loss ratio for the week was either 57% or 62% win/loss ratio. How you look at this depends on how you count the trade that was good for two pips (breakeven trade). Some traders don’t calculate breakeven trades while others count them as wins because they are slightly profitable. No matter which way you decide to view the win/loss ratio, it was still a successful week in the Forex market.

I hope you enjoyed this week’s Forex trading lesson on how to overcome losing trades and become profitable. Not all weeks will end in profit, but all weeks can end in a consistent application of your rule set.

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Forex Trading Lesson Video

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