"Trading losses are awful!" "Losses are terrible!" I can't have a loss!" "When I have a trading loss, it just shows I'm not a good trader, husband, father, provider,... or person!"
How many of us have such thoughts about trading losses? Most, I would imagine, though we never talk about them. We may not even acknowledge them, but they are important. They cause us to cut winners short, hold onto losing trades, avoid pulling the trigger, and even over trade by entering a marginal position to make up for that last loss.
Impact of Thoughts on Losses
How we think about losses is important. Our thoughts about losses influence our trading behavior. They can affect how we see ourselves as traders and our self-esteem. Thinking about losses in such an unconstructive manner can create a negative trading spiral and actually compound our losses: We think losses are just dreadful. In trying to avoid them, we commit defensive trading behaviors (cutting winners short, letting losers run, etc.). These erratic trading actions may cause even greater losses, further reinforcing the notion that losses are bad. Self-esteem and trading confidence sinks, setting us up for more of the same on the next trade...
The reality is trading losses will happen continuously throughout your trading career. They are inevitable and unavoidable. With practice and more trading experience, losses happen less frequently, but you cannot eliminate them completely.
Reasons for Losses
Losses occur for two primary reasons: we make errors and the market.
We are human and trading is complex. Trading is very demanding on our mental and emotional capacities; it is very easy to make mistakes. Also, the market constantly changes. A trade setup that worked yesterday may not work today because the market is different. Trading is based on probabilities, meaning that there is always a certain percentage of loss in any trade setup.
5 Tips
Accept Losses. Instead of viewing them as awful, recognize that they are a natural part of the game. No one wins 100% of the time. Every professional trader had losses. Give yourself permission to have losses and agree to the probabilistic truth of trading.
Commit to Trading Well. Even when you might be thinking negative thoughts about a potential loss, be steadfastness in following your trading plan. Manage your trade by what you see in the price movement and indicators, not by what your mind is saying to you.
Use losses to learn more. Learn about yourself as a trader and about the market through your losses. Are you doing things that you can improve on when you have a loss?
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If you have been around the currency market for any length of time, you will have undoubtedly heard the following terms: Risk to Reward Ratio, Double Down, Trade Size, Martingale, and Trade Allocation, Risk Allocation or any number of other terms used when talking about money management. These terms can really be boiled down to two necessary money management tools: Risk to Reward (R:R) and Open Risk.
The first deals with how much you expect to get back for the potential loss that you may realize. In other words, I reasonably expect that the trade could go in my direction for a profit of 100 points. For this potential gain what could be my potential loss. Few traders actually think about this when they enter a trade, preferring instead to let it run because the trade may turn around. And they wonder why they aren't profitable.
The minimum R:R you would ever want to assume on a trade would be 1:1. This means for every trade you enter you expect to make one point for every point you lose. This is a break even strategy if you accurate 50% of the time. To give yourself a bit more cushion for losses, go for higher R:R. A 1:3 R:R would allow you to be wrong 66% of the time and still break even.
The second consideration, Open Risk, refers to the number of positions you have open against the size of your account. For instance, maybe your account has USD $50,000 in it, if you have 1 position open, with 1 currency lot, and you reasonably expect you could lose 50 points on the deal, your Open Risk is.001. For a 50k account that is pretty conservative. If you have that same trade open with 10 different currency pairs, then your Open Risk is.01
To maintain a reasonable Open Risk, you should try to keep that number to less than 2-5%, this will allow you to sustain a good number of losses in a row and still not go broke. All of this seems like it would be very time consuming, however, once it becomes part of your regular planning, it gets faster and faster.
I maintain a blog that talks about this and many other topics centered around currency trading. Someone who knows a bit about success once said "There is no substitute for hard work." I think Thomas Edison knew a little bit about solving problems and finding solutions. Learning to Trade Forex is Learning Self Control Click Here
Most Forex traders have no idea of how or why Forex prices move and make key errors in the way the time frames they trade. In this article, we will look at three popular time frames and see which is the best time frame to trade in your trading strategy.
In Forex markets, all the fundamentals supply and demand news will be shown in the price action and so to will the views of all the traders, so lets break the price action down into 3 time frames.
Long Term Trends
The big trends in currencies which last for a few weeks to many months and they reflect the economic and political health of the country's currency. These big fundamentals change slowly from expansion to contraction and that's why these trends last so long.
Intermediate Term Trends
While the big fundamentals prevail over the long term, in the shorter term traders emotions can spike prices to far up or down and these can be seen in intermediate trends, within the big trend which can be either with the major trend or opposite to it. Typically, these trends will last a few days to around a week.
The Short Term Trend
This is the action within a day and is really not a trend at all its simply random price action. In a day prices can go anywhere and they do.
Which is the Best Time Frame to Trade?
From the above its clear that trading the long term trends can give you the biggest amount of profit with the least amount of work. All you do is get in on the trend and hold it - but long term trend following, only really suits a trader who is patient and disciplined.
Trading the intermediate term trends can be very profitable and requires less patience and discipline than trading long term trends. You can make money in both time frames and the one you choose, will simply be down to your personality.
I haven't mentioned day trading yet and its the most popular time frame to trade in but it
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Are you trying to find a way to earn an income on the Forex market? It's not easy to find. When you do, the returns can be staggering. Many people have found a Forex trading solution that has changed their lives.
The old school technical trading methods are very difficult to learn and even harder to use. With this being a very common hurdle for most new traders, companies have developed new software systems that eliminate this problem.
Forex trading solutions like these programs will help you become a successful trader much faster than ever before. Here are a few more reasons to consider getting one.
1) No Experience. You don't need a background in trading. It doesn't matter how much or how little education you have. These programs are designed to be turned on and used immediately.
2) Customizable. Whether you want to day trade, swing trade or do long term investments, these systems can do it all.
3) Affordable. You don't need to spend a fortune to get a powerful automatic system. If you can afford to buy a cup of coffee every day, you can got a top-notch program.
4) Accurate. With manual trading, you will most likely make mistakes. When that happens, you could lose a pile of money. Auto trade platforms never make mistakes.
5) Automatic Settings. Some will have the ability to trade your money for you.
6) Proven Profits. You are buying a system that is already making people money.
You know, if you were to give 2 people the exact same manual trading system, there's a good chance that they will come up with completely different results. Why? Manual trading is very subjective. It's open to the user's interpretation. If you're like me, you'll want black and white trading methods and not a bunch of gray ideas.
Some food for thought about finding the best Forex trading solution. It's time to make a decision now on how you will make Forex trading profits a reality.
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