What do traders love most? Right ! Forex trading strategies. Just one secret algorithm, one unassailable technique and we are in heaven made from gold. What do they say when you have to survive a military camp or worse... prison ? Is that your fighting techniques or muscles that will let you survive?
You know it is not. It is your spirit and your integrity and the respect of your mates that will take your through. You can not fight everybody because sooner or later you will lose.
The traders always look for this final strategy which is the path to riches and steady money. But let’s admit it is like a Grail Quest. None is working for arbitrary market conditions. Actually, there are really only three general types of trading strategies.
1. Breakout strategies are based on the movement and momentum of the price. The continuity of the process is the key for the success.
2. Mean reversion strategies based on fundamental value or extreme price conditions. These strategies depend on price reversal for their success.
3. And finally strategies based on technical, regulatory, or capital arbitrage opportunities that take advantage of certain market information available only to a few fortunate players.
The first type fails miserably in choppy markets. Mean reversion strategies get decimated in highly trending environments and privileged type strategies eventually become obsolete as more and more players attempt to exploit the particular loopholes in the market.
Strategies are still important. Within a proper market environment, a fine tuned forex strategy can generate a great trading return but once you agree that no strategy is bullet proof you start thinking about the strength of your spirit. And these here are some little things that show how strong it is.
What leverage do you use?
Do you double down on your positions?
Do you ignore your own setup rules in the heat of the battle?
Do you pull your stops when the market trades against you?
Remember that all strategies suck and all strategies are great depending on a certain market environment.
What distinguishes success from failure is much more a function of your own behavior rather than the clever little algorithm you just invented.