This article looks at the different questions you need to ask yourself when facing a foreign exchange trading rut.
Experienced traders will agree that trading ruts are inevitable, but it is the way a trader manages the rut that defines their effectiveness. In order to help yourself through a rut, there are particular questions you should ask. These questions will help establish the cause of the rut and what can be done to overcome it. It is essential that all the answers you give should be honest, otherwise the questions are pointless and you are not going to be able to get out of the rut you are in.
1. Have the foreign exchange market conditions changed at all?
The first question you need to ask is what is happening with the market. Are you looking at a trend market or a range market? If the market is trending and you are a range trader then you will not be making a profit. All trading strategies have market conditions that work for them and you need to only use the strategy in these conditions.
2. Am I working with or against the forex trend?
If you are a trend trader then you have to ask whether or not you are trading with the trend or against it. Once you have verified that you are trading correctly with the trend you should consider whether the market is trending at all. The forex market is said to trend on 20% of the time. This leaves 80% of the time when there are no trends. Your strategy may simply need to be tweaked to work with the smaller trends that you are now facing on the market.
3. Am I following my foreign exchange trading plan?
All forex traders need to have a trading strategy and rules that they follow. If you have not been following your rules then you will be losing on your trades. The rules are there for a purpose and when you divert from them you open yourself up to loss. This is the easiest point to fix to get yourself out of the rut you are in. You should try trading again and this time, follow the rules you have.
4. Do I have and am I adhering to my money management plan?
Money management plans can keep you out of a rut and help you get out of one. You should have a management plan before you start trading. Money management plans ensure that you always have money to trade with and that you do not lose all your money.
5. How many forex signals am I trading?
When you create your trading system you must take note of all the trading signals you may get. You should now consider if you have been trading based on these signals. If you have you should consider whether or not the signals were false and how you got to them. Testing your strategy on a demo account will allow you to determine which signals you are trading on and which you should be trading on.
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