If you’ve been reading about the forex industry long enough, then I’m sure you’ve found tons of offers from forex-related discussions, Google searches, and even your Facebook feed on “Holy Grail” trading systems that claim to be easy, cheap, and are guaranteed money-makers.
You’re tempted by traders who swear that they make $100/day or 5,000 pips/month using strategies that you need to ask them about.
Some of you might take a bite and buy what they’re selling while others scramble to develop the closest thing they can to a “Holy Grail” by making their own system.
We here at BabyPips.com believe in developing forex trading strategies through experience.
Establishing your time frames, indicators, your own entry and exit parameters, and risk management strategies increases the chances of the system fitting your trading personality and you following the system’s rules.
Whether you developed your own strategies or bought them, though, you should know that it requires time, patience, and discipline to give them a real chance. Testing the profitability of your forex trading strategies means sticking to them long enough to evaluate its strengths and weaknesses.
But when do you know when a system that you’ve bought or developed isn’t for you? Where do you draw the line between a bad trading day and an ineffective system?
Here are four cases when it’s better to let it go:
You can’t consistently follow your own trading rules
Sometimes one or two trades is all it takes to make or break a trading system. Just ask Huck whose HLHB Trend-Catcher System regularly deals with fakeouts but is still positive due to a couple of really good trades.
Bottom line is that you can’t judge the profitability of a trading strategy if you don’t use it consistently. If you think your system is too specific, vague, or difficult for you, then make the necessary tweaks or ditch it altogether.
Your system requires more effort than it’s worthDo you need to be awake 24/7 for your strategy to be profitable? Do you have to consult 37 indicators before you confirm a signal? Does your strategy require you to face the sun and chant the alphabet backwards at exactly 6:33 in the morning?
If you’re not comfortable consistently using your system for long periods of time or if you think that you would make more or less the same number of pips than if you didn’t use it, then it’s probably time to look at other options.
You’re spending more than you earn
Shout out to those who choose to buy their strategies and EAs! Though not all of those available in the market are scams, chances are you’ve picked an overrated one.
If your monthly signal provider gives you more disclaimers and entry and exit alternatives than profits, then it’s time to bite the bullet. Similarly, if you use your own system but have to pay for pricey subscriptions in order to be profitable, then you should also think about using other strategies.
It’s just not profitable
This one’s a no-brainer. If you’ve done your backtests and forward tests, tweaked all parameters that can be adjusted, and have used your strategy through different trading conditions and you still haven’t made any profits, then it’s definitely time to let it go.
Remember that just because a set of strategies has worked for a trader doesn’t mean that it will work for you.
Other factors such as your available time for trading, risk tolerance, and trading personality can all alter the performance of a trading system.
It takes time, effort, discipline, and maybe even luck before you find a profitable one that also fits your trading personality.
Don’t be lazy or afraid to ditch an unsuccessful system for a new one. You can’t rush potential money-makers, after all. Well, at least not the ones you’ll want to keep for longer periods of time.