The Power of Following a Forex Trading Strategy

By: Marcus Masters

Creating a forex trading system with set rules and trading parameters is the first step you should take in separating yourself from the $90+ percent of new traders that fail to turn a profit.

There are two main reasons why trading a system with set rules can work so well and make your trading much more profitable. First, as long as you do not break the rules of your system, you will never enter the market on a whim. You will only place trades when you see a verifiable reason for entering the market. Second, since all trading desisions are determined by established parameters, you will not need to deal nearly as much with your own emotions when you are trading.

The most important part of a successful forex trading strategy is the EXIT strategy, as determining when to exit the market is usually the most emotional of all trading experiences.

You will be continually be pulled in opposing directions by greed and by excitement. The part of you the is excited will be happy that you have earned a few pips on the trade and will want to exit with a guaranteed profit, whereas the part of you that is greedy will want to stay in longer to squeeze as many pips out of the market as possible.

Also, an exit strategy does not need to be too complicated. You can create a few simple rules based on the time-frame of the chart you are using. For example, let's say that you are using a 10-minute bar chart, you would probably enter trades and stay in the market for 1-12 hours.

So you could create a rule that goes something like 'I will try to get 45 pips on each trade, and i will exit the market if it goes against me by 25 pips.' Just coming up with an exit strategy like this is a very good idea because it eliminates the need to consult your emotions every time you are considering exiting the market.

Creating a system that is rather robust and mechanical is a good idea, because ideally what you want to do is completely eliminate yourself from the picture. Now I know what your thinking... 'I want to do WHAT?'

Well, you want to make your job as a forex trader only to CREATE and DEVISE effective and profitable trading strategies. You almost completely eliminate yourself from the trading picture because, once you accomplish your main job of creating a profitable trading system, all you need to do is methodically and mechanically execute it.

The reason why I say 'eliminate yourself from the trading picture' is because once you have done the hard part of devising a trading system that consistently captures pips, ANYBODY with a basic knowledge of the trading platform you are using could follow these rules and make money.

So long as you follow the system that you have devised, it will lead to completely emotion-free trading, and when it comes to consistently making good money on the forex market, emotions are the enemy.

Remember that what you want to focus on while you are doings your trading is not how much money you are making, but HOW MANY PIPS you are capturing into your account. It is subtle shifts in thinking such as this that, over time, will help you to become a very successful trader.

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