Even experienced traders make losing trades. No one can become perfect. Losing is part of the game. If you use technical analysis to make trading decisions and always look for the perfect trading signals than the number of trades that you maybe able to make may not be that much. You see, even professional traders know this fact that there is always a diminishing return to the ratio of winning trades. You will always lose some trades and win some trades. The art lies in learning the skill of making more winning trades as compared to losing trades.
Now let's get down to the brass tacks. When you lose a trade, you need to go into the detailed anatomy of that losing trade. You should keep a trading journal. In that trading journal, always enter each trade and try to analyze it afterwards. Even if you make a winning trade, try to analyze did you exit at the right time, could you make more profit. When you do into the anatomy of a losing trade, try to find out whether your trading strategy is sound or you need to change it. Now, what can be the most obvious reasons of losing a trade? The most common reasons for losing a trade can be: 1) Making a bad entry, 2) Placing the stop loss in the wrong place, 3) trying to be greedy with a bad profit target and 4) of course the sudden breaking news, something out of your control.
Let's analyze each of these factors to see how they can make you lose your trade. There are many reasons for a bad entry. The most obvious and easy reason can be you clicking the buy button when you wanted to click the sell or the other way round. Yeah, this happens with the experienced traders as well. This can happen due to distraction or fatigue on the part of the trader. You might enter the wrong number of lots that you want to trade. So don't try to hurry in a trade. Make a checklist and always use it before entering a trade.
There is always a tension between your need to limit your losses and the market's need to move up and down most of the time for no apparent reason. If you try to limit your losses too tight, the market may constantly throw you out of your trade. So you never know, you will have to learn the art of constantly moving your stops. Another way is to not use static stop losses rather go for a dynamic stops.
Some people make the mistake of putting a fixed take profit order for each trade in their minds. What they don't know is that the market has got it's own dynamics. You cannot force the market to give you what you want. What you need to learn is an attitude to take whatever the market offers you. Good traders just avoid entering the market at the wrong time. Some days, the forex market offers them good reward other days the market may be fraught with extra danger. And then there is always the danger of a sudden breaking news!
About the author:
Mr. Ahmad Hassam is a Harvard graduate. Discover a forex trading system with an ROI of 2956.16% per month: http://www.ninjatraderblog.com/trading/2009/10/forex-trading-syst em-2/ Give 60 days RISK FREE trial to Forex Income Engine by Bill Poulos: http://www.ninjatraderblog.com/trading/2009/11/forex-income-engin e-flexible-forex-day-trading-with-this-risk-shield/ |
