Do you ever just know that the market is going to head in a certain direction but your system does not allow you to trade it?
Or perhaps you have just seen the move that your system is designed to capture, but you are not involved.
These are common problems that traders face.
If you find yourself frustrated by your strategy, or upset at the opportunities you have missed, it is a sign that your trading rules are not allowing you to express yourself in the markets. There is something missing in how you implement the trade – a gap between what your system is letting you do, and what you see in front of you.
A good system should act as a framework for you to take advantage of the opportunities you see, while managing your risk properly. A great system is a profitable extension of yourself and your trading ideas.
How to bring your system into line?
- First, you need to be very clear on what opportunities you are trying to capture. You need to have a detailed grasp of what your edge is.
- Second, you want to understand the characteristics of the market you are trading. I.e.when your edge appears, what normally happens?
- Thirdly, you need to create rules that you’ll follow when the market behaves normally, and then different rules that protect you when things go south.
Then is it is simply a matter of trading your rules and adjusting the system until it does what it should. A great system will prove itself harmonious, by agreeing with your best ideas.
A poorly constructed system, on the other hand, will leave you on the sidelines watching as the opportunities pass you by.
A great system is what you should always be working towards. This will not only have you in on the opportunities you see, but you will be making the most of them by improving the risk/reward ratio and profitability.
About the Author
Sam Eder is a currency trader and author of the Definitive Guide to Developing a Winning Forex Trading System and the Advanced Forex Course for Smart Traders (get free access). He is a co-owner of Forex Signal Provider FX Renew (Get a FREE 30-day trial). If you like Sam’s writing you can subscribe to his newsletter.
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