If there is one question that traders dwell on, it would be this one.
But before we ask ourselves that question, we must know how to recognize one.
Before we go to that issue, do you have a clear picture of what is a Forex, and are your expectation realistic?
We are flooded in the market with huge numbers of systems, indicators, trading robots, and most of all, superb results. Forex gained very much in popularity since brokers raised leverage, so that retails can pop in. Before, only institutional traders, funds, and banks were trading in the Forex market. Today, the situation is totally different, and ordinary people from their couch can earn money in the market. Can, but most don’t.
It’s rather simple, but most of you can’t escape from the very nature of human beings. Emotions. When we trade on a demo account, everything seems perfect, because trading isn’t that hard. You don’t have to be super intelligent or stare at the screen all day long. But when emotions kick in on live accounts, you start burning your accounts. And you think, I will find a better system next month. And the story repeats itself.
Nothing new for you, right? So, what is the big secret? Believe it or not, but most retail traders rather will have the thrill of trading and often wins, which means more weekly trades and more rush in their veins, than look at a total profit by the end of the year. Forex is a long-term investment, a marathon, so why you think you can earn tons of money in a few month’s time? Sometimes that is possible, but I never look at this job in that way. It’s a job and an investment. For quick and fast gain, this job is called gambling. And it has nothing to do with investment any longer. So put your emotions aside, stop your urges for sudden joy and start looking at Forex as an investment. When you shift your mindset in that way, believe me, you are not 50%, but 80% on your way to a professional forex trader.
Now that this extremely important information landed in your mind, I will reveal to you the next crucial answer on how to recognize winning forex strategy.
To recognize a winning strategy, you must know what makes one a stable and profitable forex strategy.
1. No strategy will make you an 80-100% success rate. Those with that high win rate are called grid and martingale strategies, and they always burn the account when there is a larger trend in place.
2. All strategies must make losses periodically. Drawdowns are part of trading and trying to escape from them, will just get you into much bigger trouble.
3. The best strategy is one that is confirmed over a longer period of time and on a live account. It is easy finding a strategy that made wins for a couple of months, but almost impossible to find one that was doing great for over a year.
4. Risk management is the key to any system. The use of SL, TP, trailing, and calculation of lot size is paramount of the forex trading.
Without knowing these facts, you will just become one of the many victims of many predators that lure naive traders in their net.