When you’re in the trading business, there are a lot of steps you need to take in order to devise a good strategy. And since this can be tedious work, many people try to avoid it at all costs. This, however, usually leads to loss of profit. If you’re just starting your forex career and would like to avoid the most common mistakes, simply read on!
Never mistake complicated for better
Once you’re in the business, chances are you’ll soon come across one of the more complicated approaches to forex trading. Since they usually go with many charts that are filled with countless variables and thus very difficult to read, they appear impressive. Don’t let this fool you, though, since despite the fact that such strategies are thoroughly thought through, this doesn’t mean they’re more successful than others. It’s no wonder that many beginners believe that they’re the only right way to devise a good strategy, but sometimes the simplest approaches turn out to be the best!
Include all costs right away
When it comes to forex trading, some of the main costs include slippage and commissions. But there aren’t that many systems that include them in the final numbers. You might think this is due to them not being that important in determining the profitability of a strategy, but you’d be wrong. One of the results of developing a strategy without taking these costs into account is taking trades that aren’t necessary. So if you want to avoid deciding on a less profitable strategy, make sure to include the slippage and commission costs right away!
Don’t use all the historical data
Testing a strategy is an important step in the process of development. And although it might seem better to include all the available data, this is usually what leads to all kinds of rookie mistakes. The alternative is using a single out-of-sample test to decide the profitability of a strategy. You can also opt for walk-forward testing, which is basically the same thing, just with multiple out-of-sample tests. But whatever you do, don’t use all the historical data!