The Truth About the Perfect Trading Strategy - Does it Exist? (2024)

Don’t Expect to Find the Perfect Predictive Trading Strategy Formula

There is no such thing as a perfect trading strategy. Full stop. Repeat that to yourself over and over again until it’s burned into your brain. Whatever gurus or educational programs offer or promise, never forget that big truth – there is no perfect trading strategy.

The perfect trading strategy doesn’t exist because everything that occurs while trading is acting on a real market. It’s only presented as charts and appears as a set of rule-based numbers and data. The reality is, it’s real, fluid data that is registered from real markets.

In such a reality, you can’t expect things to occur in solid patterns or happen in a rule-based formula in such a way that you’d be able to find the perfect nuclear core reasoning for everything. There is no answer for everything. In this sense, trading is just like anything else in life. You will always be surprised by all the aspects that create the current circ*mstances. You can’t expect things in other parts of your life to magically come together or to resolve problems with the snap of a finger.

The Forex Market is Much More Unruly and Chaotic

This is a very common misconception people come to trading with. Many come with an attitude that the market can be resolved with simple things like trend lines, trending channels, chart patterns, candlestick patterns, indicators, etc. All of these tools are mathematical interpretations of the market, but when you remove the math, the market looks much more unruly and chaotic. That’s because it is a result of thousands of different driving forces that collide and work off each other. You can never predict this sort of frenetic activity perfectly.

Therefore, expecting to have the perfect predictive trading strategy formula is a no-go. Remember what we told you at the beginning of this article. Neglecting to accept this truth will only lead to frustration when you realize you can’t obtain it.

Unfortunately, many educators promise near complete accuracy when it comes to forecasting and predicting the market. Be careful of these educators and set off an alarm should you come across them. Avoid this type of education because it’s entirely unrealistic. The same warning applies to software that offers to do the hard work for you. The software can only scan code-specific patterns or combinations of events which means it’s ill-equipped for the improvisation that is needed to successfully navigate a constantly shifting market.

Don’t Run from your Trading Emotions

A quick Google search returns a handful of articles on how to restrain your mental impulses when it comes to trading. Many gurus or educators have tackled this subject by telling their proteges to simply avoid the mental aspects of trading. They advocate coming to trade like a robot, pushing aside the human brain elements. Here’s another full stop for you – this approach is impossible. As human beings, trying to avoid these feelings will only cause trouble. Rather than denying our emotional nature, we need to embrace it and learn to control it. We need to find ways to work with this x-factor because it’s not possible to delete it entirely.

Coming up with a solid action plan for how to deal with emotions is the best step toward living and working with this most human element. Learn through your life and daily experience how to psychologically control your emotional experience while trading.

Another way to deal with your emotions, as suggested by “experts”, is taking automatic trading or expert advisers. Many vendors suggest this solution because it implies that you will be emotionless when executing automatic trades. This is a delusion, however, because the market never works by definite patterns. Even if you see patterns coming, remember that these patterns have very tiny new differences that change constantly, always affecting the outcome and algorithm you’re working with. Therefore taking auto trading is not a viable solution for dealing with your mental challenges in trading.

REPEAT – No Trade is Perfect

Expecting the perfect entry or exit, or expecting to hold on and take the full wave, are all things that are incredibly rare. This is the tough reality of trading – most of your trades will be far from perfect. Acknowledging this is incredibly important and can’t be stressed enough. If you expect perfection, you will suffer through a lot of frustration. There will always be self-criticism towards how you traded.

Accepting that no trade is perfect relieves you of a giant burden. Once you come to terms with this, you’ll only take what you expect and not dwell on what the best potential outcome would bring. You need to let it go and be happy with what you have, not upset with what you potentially could have received.

Imitation is a Ticket to Failure

Each one of us has different ways of understanding and processing situations. We all see things differently and experience market events uniquely. When you have a teacher or mentor, you can try to learn the concepts that they reveal to you, but you can’t expect to be successful the same way they are.

What works for them can contribute to your success, but in order to really succeed, you will need to custom tailor everything you learn to fit your special way of thinking. This is key to explaining why someone might succeed where you fail despite both of you adhere to the same task plan.

Trading is NOT a Technical Task

We’ve mentioned this before, but you should make sure to remember that trading is not a technical task. You cannot break down your trading strategy into a checklist that will work all of the time. You will experience so many scenarios that, when coupled with your momentary mental state, will always provide new and unpredictable events.

It’s therefore helpful to think of trading as more like management. It’s akin to dealing with people, risks, and emotions. You’ll need to know how to combine many different aspects of these elements in order to succeed. If you understand how all of these moving parts come together the most efficiently, that’s a great start towards a successful career in trading.

So what should you do to get the Best Results from your Trading Strategy?

Here are some recommended points to improve the success rates of your trading strategy:

Personality

Learn yourself. Each one of us has a unique risk tolerance. Some are more aggressive, some more conservative or analytical.

Make sure you use a trading strategy that fits your risk profile and fits your daily schedule.

Testing and documenting

Markets are always changing and evolving. Your system should as well. Backtesting and documenting your outcomes will tell you if you are in alignment with actual markets. You will be able to find mistakes in order to avoid making them again.

We, in The5ers, have made it easier for you and created a special freePDF trading planthat will help you build a personal trading plan.

Trading plan

Your trading should not be random. Make sure you take trades based on your plan only. Overtrading or revenge trading will cause you a lot of trouble. Focus on quality instead of quantity.

Risk management

A correct risk and money management plan must be set in place within your strategy. Make sure you use a strategy with a high risk/reward ratio and a high win/loss ratio. And don’t risk more than you can allow losing.

Using stop loss

Always, always, always have a stop loss in place. Not using one is like jumping from a plane without a parachute. Unexpected movements happen in the forex market that may cause the price to move very fast. In those cases, stop loss will save your account.

Do not avoid your emotion

As we said before, trading is emotional. If you are feeling insecure, nervous, or sad when you lose or trade, you are not trading a system or lot size that is right for you.

Start by reducing your lot size so you don’t get upset when you lose. Then make sure the strategy you are using really adapts to your life rhythm and your way of reading the market.

Perfect Trading Strategy – the Bottom Line

There you have it. The perfect strategy doesn’t exist. The good news is that you don’t need one. With the same trading and market conditions, there are a lot of very successful traders out there. Stop looking for the holy grail and start working on your own trading skills; the trader makes the strategy, not the other way around.

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