So you're interested in Forex trading but you're losing money like an addicted gambler? Have no fear, here's the solution.
Match Your System with The Market Of course, whatever style or method you choose to trade, it needs to be profitable.
Mathematically, this means that at the end of the day (or month, or year), if you clump all the winners and losers, you'll end up net positive.
Statiscally, this is called having an edge, or having a positive edge.
You must make sure, through backtesting and managed forward testing, that your system is indeed profitable.
You might be asking, "But I can't seem to follow my trading plan.
" We'll get to that later, but for now, let's assume that you CAN follow your trading system perfectly.
Matching your system with the market means that the system works for that market at the time.
Keep in mind your system might work for the EUR, but maybe not for the CAD.
Also keep in mind that the system might have worked for the previous 6 months, but something happened to the market that the participants are acting differently now; this would mean that your system was profitable for the past 6 months but the market change has nullified your system's edge.
Let's assume that your system is somewhat profitable if you could follow it perfectly.
So what's next? Match The System With Yourself At this point, you might be thinking, "Hey, I was looking for a How to trade forex article, not some self-help psychoanalysis article.
" Do yourself a favor, and read through the entire article, because this might be the key ingredient your trading has been missing.
This is the part where 99% of the traders don't seem to understand.
If you happen to talk with other traders, please feel free to point this section of the article out; it might be the missing key ingredient in your entire system.
It's pretty obvious that if you have a profitable trading system written down in your trading plan, but you can't seem to follow the rules, that trading plan is as good as useless.
So why do you deviate from you trading plan that you've researched so hard for? There are two primary reasons: 1) Your expectations as an analyst versus your expectations as a trader.
And 2) Your trading system doesn't match your personality.
I could write an entire book on the first issue, but we'll focus on the second issue in this article.
To trade with consistency, you need to understand how your subconscious mind works.
If your trading system contradicts who YOU are as a person, your mind will NATURALLY pull you away from that trading style, and SUBCONSCIOUSLY gravitate you to a particularly different trading style.
A lot of people get confused here, and this is one tough concept, (and really, not too many people want to learn about it) so don't worry if you're confused.
Let me give you a few examples, the first ones illustrating basic principles, then drilling down to more subtle points: First example is John.
John likes playing video games.
He loves playing 5 handed table Texas Hold'em (poker) with his friends.
He likes playing hardcore sports.
He is a risk-seeker.
His natural trading style is day trading and/or fast swing trading.
He cannot naturally trade longer time frames because that's not who John is, and John is a fast-paced guy.
So no matter trading system he's researched, backtested, and written, he won't be able to trade it unless it fits his naturally fast-paced personality.
Also note that his personality has gravitated John towards all these other fast-paced activities like video games and poker.
Let me give you a more subtle example: Susan was an underdog all her life.
So she pictures herself as David who fights against all the Goliaths of life.
Whenever there's a competition, election, or basketball game, she always roots for the underdog because subconsciously she relates more with the underdog.
How does this affect her trading? She's naturally a fader.
Fading the market means going the opposite of the major trend.
So while trend followers go with the majority of the market participants' decisions, Susan is the opposite; she naturally likes to bottom/top pick and go against the trend.
This means that she has to either 1) change herself to match the trend following system (which is hard), or 2) find and develop a profitable fading trading system (which is easier).
Mostly likely, she'll have a better time trading sideways markets, fading at the edges of the channel.
Of course, how she decides to trail also depends on her self-image.
At this point, you might be thinking, "Ok, this is starting to make a little more sense now.
But I don't really know how to do all this stuff.
" Let's move on to the final point.
Know Yourself Schedule a 1~2 hour block of free time and go through this this action plan:

• 1.
  Make a list of all the activities you enjoy doing.
  
• 2.
  Make a list of all the people you naturally enjoy hanging out with.
  
• 3.
  Make a list of all the movies, TV shows, sports, etc.
  you naturally find pleasure in.
  
• 4.
  (Insert more questions you can make up)

Take a close look at all those items, and focus on analyzing what kind of item it is.
For each item determine:

• 1.
  Is this fast-paced, medium-paced, or laid back? Are you a New York City person or a Southern California person?
• 2.
  Is this more number smart or people smart? Are you naturally good with numbers or with peoples' feelings?
• 3.
  Is this more of an underdog or topdog activity? When you watch a tennis match, do you root for the topdog or the underdog?

All these things reflect who you are at the time.
The more laid back you are, the larger the timeframe you need to trade (because you would trade less frequently and the trades would take a longer time).
The more fast-paced you are, the more you should swing trade or even day trade.
The more number smart you are, the more systematic, quantitative, and progamming-oriented you are with your backtesting and trading.
The opposite would be much more of a discretionary trader.
The more topdog-inclined you are, the more of a trend-following system you need to trade.
The opposite would be fading at the edges of a sideways channel.
But keep in mind that most people are a combination of the two.
Explore yourself.
Take some time for self reflection.
Here're more questions for you to really think about:

• 1.
  What does this list say about how I should trail my trades?
• 2.
  How should I enter and exit? Partial profits or not?
• 3.
  Which markets should I trade? Which session should I trade?
• 4.
  Should I consider trading stocks, options, or futures instead?
• 5.
  Should I use technical analysis, fundamental analysis, or both?
• 6.
  Am I even right for trading?

Let's look at one last example: Mathematically, if you don't take partial profits - that is, you enter and exit only once, and not exit multiple positions - you would make approximately 3~4 times more profit than traders that do take partial profits.
To clarify, let's say you're long 3 contracts, and you unload 1 lot at +25 pips, the second at +45, and the last at +60: this is what I mean by taking partial profits.
But let's say you're short 3 lots, and you decide to exit all 3 lots at +47 pips.
That would be the opposite of taking partial profits.
But again, let's take a closer look at what I talked about in this article and relate it to this point: Sure, on paper you'd be more profitable, but then again, all trading plans are profitable.
It's just that you couldn't follow that plan in the first place.
Just as likely, not taking partial profits is more profitable, but it's the same principle - it's easier on your mind to take partial profits.
It's a trade off between psychological ease and economical gain.
There is a deep underlying reason why every trader naturally wants to take partial profits, and I could write a separate article on it, but suffice it to say that everyone initially is naturally inclined to cut profits short and let losses run.
(As a teaser, it's about how we grew up in society/school/parents that has instilled beliefs that are beneficial to us in society but detrimental in the markets.
) The more question is can you trade this way? Should you trade this way? Forget about what's more profitable on paper.
Focus on being able to trade with consistency by trading according to your natural self.
Well I hope this article has shed some interesting insights with your trading.
Perhaps you're ecstatic at this new finding, perhaps you thought this was a waste of time, or perhaps you don't even have a trading system yet.
Don't worry, take your time.
So what now?