We’ve all had them…trades that go wrong. Even the best traders stop out, although saying that I have 2 or 3 that seem to never ever cancel a trade unless it is in profit. I have been on the phone to a trading room and they told me about the Bank of England causing stirling to drop 300 pips and they stop out on deals losing thousands of dollars.
Why do trades go wrong?
1. Read the market wrong
2. Stop loss not large enough for the market conditions
3. Trading against the trend (WHY?)
4. No Trading plan
5. Just bad luck
6. PANICKING and listening to other traders who are just as bad at trading as you are
Whatever happens a trade can cost you money when you stop out, or MAKE YOU MONEY. Yes, here’s how. Look at the trade and fix your trading plan. If you continually stop out and then the pair does what you thought it would do, guess what, your stop loss is too low for the risk. Watch other traders, with eToro <clicky, you can copy and watch other traders and even communicate with them.
If you make little money when you do take profit, you’re probably not being patient enough, even on winning trades I ask myself what I could have done better, refine and learn, refine and learn.
What does make me laugh is the amount of traders (and I’ve done it, just read below) that look at a bearish trade and spend their time going “oh it’s going up now…it’s going up”, who cares? It probably isn’t, if a trade has been bearish for 6 months, why worry, just SELL the trade silly. The odds are it will carry on being bearish.
Incidentally, taking profit all the time can be just as bad for you as stopping out. How many times have you taken a profit on 10 pips and 5 minutes later the pair has jumped 100….what stopped you waiting, fear? You’d made a plan, you are trading with the trend and yet you quit your plan. Which means what? It means you were not trading on your convictions, fear stepped in, I think it was one of the Karate Kid movies, where the master told his young pupil, “Control your Fear”.
You know why so few people win the million on who wants to be a millionaire? Fear of losing. They know the answer, but the risk and fear outweighs their ability to win, it’s amazing how under pressure any plan we had for the game has gone. It’s all in your head.
In Forex if you are scared of losing your risk, you are risking too much, I heard one trader call it the “Pillow Test”, if you can’t sleep and wake up worried about your trades, guess what your risk is too high. Perhaps you need to go for longer term, lower risk trades that gently meander along and are far easier to sleep on.