Almost every trader, especially those who just begun their Forex trading journey forget to ask themselves this one fundamental question,
What is the most important thing in Forex Trading?
Take a moment and think about it. What is the most important factor to observe in trading? Is it your trading system? Is it your trading plan? Is it your win rate? Is it the indicators you’re using? Or is it your psychology?
Well remember this, the most important thing in trading isn’t your holy grail strategies, and simply isn’t your winners and losers, it is Your Account’s Equity Curve. An equity curve is a graphical representation of the change in value of a trading account over a time period.
An equity curve with a consistently positive slope would generally indicate that the trading strategies of the account are profitable, means it’s healthy and this is what we should focus on, a healthy growing equity curve!
Most traders spend too much time in the Winners Losers cycle.
They spend too much time perfecting their strategy, adding indicators, counting how many wins they reap, how many pips they could have caught, trying to crack the code behind Forex trading.
If we treat your trading career as Time Frames, Your trading system, your trading plan and your risk management strategies are all just smaller time frames in your trading career.
But your Account’s Equity Curve, is the bigger time-frame of your trading career that measures your true performance and it is the indicator of your success!
Now, your trading strategy is important, your trading psychology is important too and reviewing your winners and losers are certainly important, but the most important thing in trading is How your trading account grows.
Now this may sound mind blowing but if you plot and map out your equity curves, you will see price action like you see in price charts and the areas of whipsaws give you a crazy load of information to your trading system and psychology! So learn to review your account before reviewing your charts and trust me your trading performance will improve gradually. This will let you know whether the fault lies in your system or is it you sabotaging yourself. Trade safe.