The Fire-and-Forget Principle

I often find it helpful to think about my trading strategy in terms of vivid, concise analogies or metaphors. These function like mnemonic devices, summarizing key trading concepts in an easily-remembered mental picture. One metaphor I've been finding particularly helpful lately is the "fire-and-forget" principle. While this term was first applied to military technology, many of the concepts involved apply extraordinarily well to the more peaceful world of forex (actually, on second thought it's not always that peaceful...)

Essentially, fire-and-forget means designing and deploying a weapons system that can be launched and that will stay on target without any further input. It's able to function completely autonomously, allowing the launcher to move on to other tasks without worrying about the system and what it's doing. To quote Wikipedia's definition: "The military use the term for a type of missile which does not require further guidance after launch such as illumination of the target, and can hit its target without the launcher being in line of sight of the target. This is an important property for a projectile to have, since a person or vehicle that lingers near the target to guide the missile...is vulnerable to attack and unable to carry out other tasks. Generally, information about the target is programmed into the missile just prior to launch."

What does this have to do with forex? Well, in my opinion one of the most important goals in forex trading is the ability to design and execute a trade with all the key parameters factored in ahead of time, and once the trade's been made, to step back and allow it to follow those parameters (or its "guidance system," to use another metaphor) without any further input. It may miss its target, as trades sometimes will, but instead of having to watch it minute by minute to see if it hits or misses, you'll be free to get to work on your next trade. Following this principle will also help you break the habit of excessive, obsessive monitoring and tinkering with your trades after they've been put in play, which is one of the worst things you can do for your peace of mind and your account balance.

So what are the parameters you'll be building into this fire-and-forget guidance system? A short list could include:

• Currency pair (pretty obvious)
• Entry signal or entry price
• Entry time
• Number of lots to trade
• An exit system, which could include: limit orders, a timed exit strategy, an exit signal, or any other rule-based exit (emphasis on rule-based, not gut-instinct based, fear-based, or impatience-based!)
• A stop-loss, either fixed or trailing

Equally important to have on hand are data on the historical performance of this type of trade. Without that, you're trading in the dark. Remember, the data is your friend.

Once you have your trade parameters in place, the true test of the fire-and-forget principle is whether you can actually "forget" after firing. Are you able to walk away from the trade and accept the results, good or bad, without trying to influence them once the trade is underway? It's very easy to say "Yes, of course, that's the easy part," but the fact is, it's probably the hardest part. You may find you need another set of rules about how often you're allowed to check on the trade, if at all - because it can be very tempting, especially when real money is on the line. But think of all the time you'll free up to improve your trading system once you're able to step back and to let your trades guide themselves!

Related topics:
Limiting your emotional exposure to the markets
The data is your friend