Forex traders describing their trading methods

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As I read through chat forums full of Forex traders describing their trading methods, it strikes me that it is extremely common to attempt to gain control over the trading process by adopting targets for just about every variable. While this can be productive, it is also possible to be too rigid when trading Forex. In this article I am going to examine common trading areas to which targets are applied, and evaluate the pros and cons of each to help you create a more flexible trading strategy if desired.

Number of Trades

It is very common to hear traders say that they will cease trading after winning or losing a certain number of trades per day. Whether this makes sense (or not) depends largely upon what type of trading is being undertaken. If it is scalping or very short-term trading, then this is just a psychological defense mechanism that would probably only limit the profitability of an effective trader. However, for swing or more long-term traders, such a rule is probably helpful, because if the first two or three set-ups fail quickly, a winning set-up becomes increasingly unlikely to form. Additionally, if losing trades occur at the same price area, it is probably not going to be a fruitful area in the very near future.

Of course, psychological devices may protect against catastrophic losses, even if they are not valid statistically, and if a trader’s nerves are shot from losing a number of trades consecutively, it is probably a good idea for them to stop trading at least for the rest of that session, until the recover psychologically.