Many forex traders often switch trading methods to get suitable forex trading that will increase trading profits consistently.
However, they often fail to realize that a new trading strategy is not the answer. According to Investopedia, trading methods experience strings of losses, and this is not reason to abandon your old strategy. In fact, with a few systematic and gradual modifications to the trading style, level of experience, and personality are more likely to produce positive results.
This article describes a step-by-step process that uses simple steps to improve your forex trading methods. Thus, you don’t have to look for new trading styles repeatedly.
In this article, traders are assumed to use price action based trading styles (trading chart patterns and candlestick patterns), breakout trading strategies or systems to follow trends, etc.
Let’s check out the simple steps to increase your trading profits consistently:
Step 1: Analyze Expectations vs. Results
The first step is to identify several samples of your trading results and compare them with your expected results.
It can help the trader determine the extent to which this strategy needs improvement and change. For example, you expect a win ratio of 70 %. However, in reality, your winning ratio is only 30%. Thus, your trading system needs a
modification.
Moreover, you need to evaluate the cause. Are you trading forex following the rules of the trading system? Are you impatient to enter the market for fear of missing out on profits?
Ideally, matching forex trading results with expectations should involve several other key performance indicators.
For example, the risk-reward ratio (ratio of how much a loss and profit an investor can receive), average drawdowns (average capital decline), average trading frequency, etc.
Step 2: Validate Your Trading Opportunities: Entry, Capital Management, and Exit
By using a comprehensive analysis of past trades and your personal experience with current trading strategies, traders must separate the various elements of trading strategies. It includes criteria for entry, capital management, and exit. This step is to separate good results (good entries, good exits) with bad results (good entries/bad entries, bad exits).
Some people think the inconsistency of trading results has to do with the high frequency of trading arrangements generated by your system.
Thus, you have to start following the system rules in your daily trading.
Step 3: Eliminate Bad Trading Methods and Fix Them
Don’t make a big mistake by discarding all trading strategies that have been undertaken and adopting new trading strategies. If you can make simple adjustments, your forex trading skills will improve.
Start by lowering excessive entry criteria. Don’t stare at looking for favorite pin bars only on round numbers. You need to determine important support and resistance levels. Additionally, you may need to replace predetermined exit levels with those planned independently for each trade.