Monday, July 22, 2024
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Don’t forget to test your Forex trading strategies!

by xyonent
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To consistently make profits in Forex trading, you need to earn pips, hold on to them, and repeat the process.

Unfortunately, it’s not as easy as it sounds.

Successful trading requires more than just having a great setup – you also need a market advantage system, solid risk management, and a firm grasp of trading psychology.

By testing your trading strategy, you can know if you need to adjust the settings you are running.

If you know for a fact that your system is maintaining an edge over the markets, you can more confidently focus your efforts on developing your risk management and trading psychology.

Simply put, backtesting and forward testing scientifically weed out the bad trades from the good ones.

Taking into account your usual trading parameters and risk tolerance, you will know which currency pairs, time frames, indicators and trading environments will produce the best pips.

Test systems also help you to increase your confidence when executing trades, which is why we recommend this activity for beginners and demo traders who are considering live trading.

A lot of the fear that traders have has to do with uncertainty. Common mistakes like cutting profits, letting losses slide, and not using stop losses come from the fear of being wrong.

But if you know and can predict when your system is likely to rain pips and when it is likely to miss, you are more likely to stick to your trading plan.

Trader A knows that her trading system is good at catching trends. She has analyzed the numbers from the past few years and has learned not to panic when her system has small fakeouts or losses in range markets. She knows that even with losses, her system has a chance of making a profit by the end of the year.

However, before you start calling your programmer friends, you should know that testing a trading system has its limitations – specifically, testing cannot tell you the effect of slippage or broker fees.

If you trade over a short period of time or make a large number of trades in a day, these factors can change your overall profitability.

So how do you start testing your strategy? Traders today have the advantage of having a wide variety of programs and platforms to choose from. Ask your broker for recommendations or search Google for the best options.

Remember, like any repetitive (but necessary) activity in Forex trading, testing your system gets easier with time and practice, but the benefits still far outweigh the drawbacks and will no doubt help you become a consistently profitable trader.

Are you looking for your own place to record your market observations and trading statistics? If so, check out TRADEZELLA! easy to use
A journaling tool that will lead to valuable performance and strategy insights. Easily add your thoughts and charts to track sentiment for each trade. Click here to see if it’s right for you!

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