Almost all traders have faced “pervasive trading challenges" one day. This is a pervasive challenge in a situation where profits are constantly being lost, or losses are increasing. These loss-making periods or fruitless activities (that is, the situation in which a loss-making transaction destroys the profit of another transaction) can occur to anyone at any time. Sometimes this may be due to a change in market direction; sometimes, it may be because the trader has changed his strategy or is no longer adhering to a specific plan. Regardless of the cause, the trader can ask himself 5 questions to identify and investigate the problem; thus, he can start making changes and return hopefully to the profitability process.
The following questions should be answered as honestly and completely as possible. Each examines current market conditions and the trader’s personal strategy. Traders need to know that harmful trades happen to anyone, and even for the best trading systems, there may be a chain of losses. Therefore, trading rules and strategies should not be reviewed with any losses. These questions should be used when the trader is at a loss. These questions must keep the trader on track and help prevent “widespread challenges" from beginning.
Based on my methods, does my deal move in the direction of making a profit?
Markets are constantly going up and down, out of trend, out of trend, and back into volatile conditions. So it can be used in certain situations, it may not be useful in other situations. The trading plan may run flawlessly, but if used in the wrong place, it will fail.
Therefore, traders must determine their entry points, loss limits, and profit margins and capital management strategies with market conditions. Otherwise, they must refrain from opening the transaction or create alternative strategies for such a situation until the right conditions are met.
Is my transaction in the direction of the trend or vice versa?
Many traders develop strategies that can benefit them from the process. Trends are formed in different time frames, and the trader should pay attention to which trends are more suitable for the trade.
Trading in the direction of the trend can vary based on the trader’s view: the short-term trend may go in the same direction, but the long-term trend may be the opposite at the same time. Therefore, recognizing the trend in different time frames and choosing one of them for the transaction is a determining factor in the success of the transaction.
If trading trends continue to be impaired using the tracking strategy, the trader should check whether the market has a trend at all. If the market is trendy, the entry point is probably too late or the price loss is too close. If the strategy seems to be profitable, it is important to consider whether the strategy rules are fully complied with. The problem may not be the strategy, but the trader’s lack of order.
Do I have rules for entering and exiting, and do I follow them perfectly?
There are “all-encompassing trading challenges" when the trader does not have a complete plan for how to enter and exit trades. Are the entry and exit rules written in detail? Details should include how and when to enter and exit.
Traders should consider even the smallest changes in the trading plan. For example, whether to open a transaction as soon as the signal is issued or to wait for the price to close, and vice versa. Such changes can change the dynamics of the strategy. Also, the trader should ask himself: Have my trading rules been tested? And what are the hidden assumptions of these rules? To test the effectiveness of any strategy, you can use past price checks, virtual transactions, or demo accounts.
Do I trade with all the strategy signals or do I just choose a certain number?
When a system is created, especially when it is based on a previous test, it is assumed that the trader will trade all the signals. If specific traders filter some signals, they should be ignored in real trades. So the trader should ask himself if I am exactly matching the trading strategy or if I increase or decrease the number of trades; if more trades are opened, he should check which part of the trading plan was not. The transaction plan should not be blamed. The trader must stop these extra trades until the trading with a profitable system is successful. If not all signals are traded, the strategic profitability assumption can be severely distorted. Traders need to check whether the trades they have given up have been profitable. If so, trade all signals from now on.
Do I have capital management rules and do I follow them?
One of the most important aspects of trading is capital management. In any transaction, the transaction risk must be limited to a small amount, ideally less than 1% of the principal amount. So the trader should ask himself: If the rules of capital management are appropriate, do I follow them?
The rules may be appropriate, but in real transactions, the losses are more than acceptable. Slippage and fees can make losses too predictable and ruin a profitable strategy.
Of course, if the risk is not taken into account. If the losses are consistently too much to predict, reduce trading volume, or go to a brokerage that has a lower fee, or don’t trade at all in this market, as its slide may be so high that it can’t be. Properly controlled risk.
The final word
Successive losses occur to everyone, especially when the person has traded enough. The source of “pervasive challenges" is either the market or the trader. Traders can scrutinize losses by carefully examining their trading system and hopefully make a profit.
Continuous monitoring of markets and review of system performance are other ways to achieve this goal. The trader must also check whether his trades are in the direction of the trend or not. Are there rules for efficient entry, exit, and capital management; are all signals traded, or more importantly, are all rules followed? By testing the market and carefully examining the trading plan, the root of the problems can be found and the situation can be corrected with appropriate measures.
Published and authored by FalconProfit.com
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