It’s been super interesting 4 weeks in the Forex markets and while we had 3 weeks of choppy and hard to trade conditions, last week was absolutely incredible. But let’s back off a little.
When does your system stop working?
End of August until mid/early September, the Forex market didn’t give good signals on the 4H and Daily timeframe for us swing traders and it was hard to find any good trades. Some of our newer students in our Forex pro room started to get worried and questioned their abilities (Click: learn about our pro room and trade with me) .
I went back to my trading journal, checked previous data and noticed that this is completely normal. There will always be times of market chop and ‘bad’ market conditions and it’s the job of a trader to know when his trading system doesn’t perform well and then step back and scale down risk.
When you are on the 4H, you only get 30 new candles in a week – traders on the 1H get the same amount per day and traders on the 15min, get 30 candles every 6 hours. Thus, those ‘bad’ market periods will come and go quicker on the lower timeframes and we don’t notice them as much. On the 4H, it can be a real challenge on yourself and your mindset.
My message: a system doesn’t just ‘stop working’ and what is far more likely is that the market conditions are just not favoring your trading style momentarily. It’s therefore so important that you are clear about when your system works and when it doesn’t so that you don’t lose your head 🙂
Making up for 3 bad weeks
The hardest part about such a drawdown is that it’s super easy to lose confidence and then you dig yourself a hole that gets deeper and deeper. When you lose confidence, you start doubting your signals, you start missing good trades, chase price and then end up taking bad trades.
I never lost confidence and I always assured our students that everything is OK too. Then, this past week, everything started to click again. Setups came left and right and lots of great trades were to be found.
I made a few hundred pips on the EURGBP trade below and it was enough to pay off A LOT of losses previously because we are always trying to cut the losses short. Then, this one single trade was enough to get me back into the green. I waited for the trade to happen for 2+ weeks and then the waiting paid off big time. I traded other things as well and ended up several hundred pips in profit last week which outweighed the previous losses.
The past 4 weeks were such a great learning environment if you paid attention. What you should remember about the past month:
- Understand when your system works and in which market conditions it fails
- As a swing trader, understand that there will be days/weeks of inactivity
- Never lose confidence if you’re following the rules
- Track every single trade so that you can analyze past performance
- Scale back risk and learn to cut losses early
Our pro student Keith made my day and he posted a 5R week and big profits. As a coach and mentor for our traders, I don’t feed them signals, but I help them understand who they are, where their weaknesses are and I guide them into the right direction with encouragement and positive feedback.
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