There have been some emails recently asking me to help them on their forex trading because they are not successful with it. What they mentioned was that they have huge drawdowns and have a couple of losing trades and that they think their forex strategy is not woking anymore. They try to build some small profits, accumulated it and then lost it to the market again. So what is exactly happening to them?

Well, the truth is not because their forex trading system is not working anymore, you can trade with a very simple system that consists of only one indicator and can be successful too. But when you do not follow the rules of your trading system, money management and be disciplined, everything can go haywire. I can assure you that.

Let’s first talk about not following the rules of the trading system. Many people are always tempted to trade the market without following the exact steps of the system. It’s either they did not fulfil all the checklist before opening a position or they are just too anxious to go into a trade. If forex trading can be that easy, why do I still keep emphasizing that you need to follow the rules? Because we do need some technical analysis before we know whether a trade has a high winning probability, that’s why you MUST go through the checklist and follow the rules step by step. If almost every requirement is met but only one is not, you still do not go into the position because that only one requirement that is not met may be the reason that the trade may fail.

So the second part I’m going to discuss is money management. Again, I do not know how many thousand times I have repeated saying that you can only risk 1% to 5% of your trading capital per trade. A few of my subscribers asked for help as they have lost thousands of dollars( with a few thousand of capital) within a few weeks or less than 3 months. How can there possibly be so much losses if they have been following good money management rules?? For example your account has $3000, if you risk $30 (1% of capital) and go for $60 profit per trade, even if you have a bad success rate of 2 winning trades to 2 losing trades, you will still make $6o profits! Ok, the worst scenario is you lost 10 trades, so $30 x 10 = $300 only, how can you lose thousand over dollars if you follow the money management rules?? I hope I don’t have to explain this further.

Lastly, always be disciplined in your forex trading. Not matter how tempting the market condition may be, how well the price may be trending, do not chase after the price if it has gone too far. You can chase after the price if you are prepared to increase your stop losses, but that’s not the disciplined way to trade. Do not try to be faster than the forex indicators unless you are really experienced in the market and know how the price action moves. We always wait for the indicators to confirm before we take a trade, but more experienced trade will judge on price action when entering a trade.