It is not easy to build forex trading strategies as it takes years to develop a successful one. The world of Forex trading is very expansive and comprehensive. You may come across thousands of strategies and rules.
Nowadays, trading influencers and video channels are coming up with promising forex strategies. Sometimes, you will meet people who claim their strategy is making them $10 to $500 a day.
Such numbers can be vast and exciting, but why is your strategy not able to make that much? Try to build a strategy that suits your trading style. Even after trial and error, your strategies can have some serious flaws in it. These signs will help you to understand if your strategy needs a change or not.
Read on to know the detailed insights about the various factors which states that your Forex trading strategies are not working.
What Are The 6 Signs?
The signs are not difficult to spot, and you can acknowledge them in your trading strategy. The faster you recognize them, the earlier you will be able to make changes. Once you identify these signs, try to use a new strategy.
- You Are Not Earning Profits
Your utmost priority should be making profits by doing trading. It isn’t easy to imagine a trading account without profits. A few trading strategies are not profitable, no matter how hard you try.
Your trading strategy is not successful until it’s delivering profits. There’s a possibility that a successful trading strategy is not making any money.
Even after backtests and forwards tests, if your strategy fails, then it’s time you change. This comes down to risk management, profit, and stop-loss levels. If you are risking too much per trade, it will backfire.
Avoid making large monetary losses while trading. In such situations, it’s time to pause and look for a new strategy.
It’s not a good sign if your losses are more than your profits. An ideal forex trading strategy should bring steady profits.
Don’t waste your funds and efforts on a strategy that is unable to deliver profits. While most people copy or mimic strategies, it’s best to have a few personal strategies.
- The Strategy Consumes More Efforts Than It’s Worth
An efficient strategy is one that is not difficult to execute. When you come up with a strategy, there are a lot of considerations. Your sleeping patterns, the duration you can spend on trading are a few parameters that matter a lot.
If you are situated in the USA, it is vague to create strategies that are applicable during the time Asian markets run.
Such strategies will require you to be awake all night. Don’t trap yourself in situations where you have to consider more than hundreds of indicators. Managing so many indicators at a single time is not maintainable; you will ultimately fail.
You require a strategy that can be used without too much effort. Don’t run behind a strategy that snatches your sleep and comfort.
On the other hand, if you are earning petty profits per trade, you should give up that strategy. You can expect the strategies to deliver low profits during the first few trades.
If your forex strategy is strong, it will pace up eventually. You should know that strategies require patience, time, and discipline.
- You’re Having an Entry and Exit Problem
This might sound more relatable to you than any other signs. For instance, your duration has fallen alongside your winning ratio, but the frequency of your trades has jumped. This implies that your entry is making fake signals between the high volatility and needs a bit of adjustment.
You can tackle this by smoothening the indicators you’re using. An exit problem occurs when the trades’ duration has significantly jumped upwards alongside a decreasing winning ratio.
This means that the moment for exiting or closing the trade is not sensitive enough. If you plan on leaving your trade open for too long, it will be unfavorable for you.
A strategy that does not have a good entry and exit plan is not ideal to be utilized. You should know how and when you can enter and exit a trade without incurring losses and making profits. When you notice that such a situation is happening, you should implement alternate strategies.
- You Are Not Able to Stick to The Rules
This can become a problem for the future of your trading account. If you keep drifting from the rules, you will have to face unfavorable losses. When you are making new trading strategies, make strict rules.
The rules exist for a reason, and they are the reason your strategy is going to work. The rules will help you make better profits and bring stability.
If you are using a working strategy, but you continuously have to dodge the rules, there’s a good chance that you could start facing losses. Rules will help you to keep your game on track. If you can no longer abide by those rules, you must come with an alternate strategy.
You will find it very difficult to chalk out profits if you keep breaking or changing the rules. The rules should drive your strategy and not vice versa.
It is normal to distract from regulations but don’t make it a habit. You have to establish your entry and exit parameters, time frames, risk management strategies, and indicators.
- You Are Investing More Than You Are Earning
This is one of the most prominent signs of a failing strategy. For example, you rent an expert advisor for $250 per month, and it returns just $175 a month. Does it make sense? You are facing a loss of $75 every month, and still, you are using it.
It’s pointless to adopt strategies that are insufficient to cover the investments. This is not an ideal trading environment for any Forex trader.
If you find yourself in this scenario, it’s better to start making alternate strategies. Why would you want to purchase an asset that will incur a loss? A well-tested strategy has the capability of at least covering the investment amount, if not giving profits. You should be very logical and thoughtful while creating strategies.
You should be extra cautious if you are following purchase signals or expert advisors. If your signal provider provides more disclaimers than profits, you should find a new one or make your strategy.
- The Strategy Is Unable to Adapt to The Market
Even before you hear the morning bell, you should be ready with your strategy. Each trade you make is unique and thus requires unique strategies as well. The market is highly unpredictable. To stay in the market, you need to keep revising and updating your strategy.
Several things influence the market, and hence you should create versatile and flexible strategies. As the market alters, it brings in new opportunities and risks. If your strategy fails to absorb the benefits and risks, it will not give profits.
Top Forex Trade Strategies
You will need these Forex strategies handy to increase your strategy fails. Forex traders commonly adopt the strategies we are going to discuss.
Position Trading
This type of trading is a long-term trading approach that allows you to hold the trades for a long duration. The timeframes you are going to trade on are usually daily or weekly. You have to depend upon fundamental analysis for trading.
This strategy is not ideal for beginners because it requires a firm understanding of the market. Since the number of trades is low, the profit margin is minimal.
Swing Trading
This is a medium-term trading strategy whereby you can hold the trades for weeks. If you do swing trading, your primary concern should be capturing “a single move” in the market.
You must understand technical concepts like candlestick patterns, moving average, and support & resistance. There is a high possibility of getting profitable every year.
Scalping
Scalping is very dangerous for the retail traders as the transaction costs absorb most of the profits. Scalping a short-term method where you can hold the trades for a few minutes or seconds.
You should know how to take advantage of the exact moment. You have to use the order flow to your advantage.
With scalping, you will have numerous opportunities during the day. This method can make you a lump sum amount. This strategy is a highly stressful endeavor. You need to be glued to the screen for many hours to carry out this trade.
Summing It Up
The best trading strategies take a while to show their effectiveness. If a trading strategy has worked for other traders doesn’t imply that it will work similarly for you. You should consider risk management, your available time for trading, and trading style while creating a trading strategy.
Don’t feel afraid to try new strategies and ditch the unsuccessful system. Analyze your current strategies very closely. If you spot even one of these six signs, you know what your next step should be.
