Trading is tough. It takes a lot of time and patience to learn the skills necessary to succeed in trading, such as following trends and staying calm under pressure. However, regardless of whether or not one becomes good at trading, there is an even more significant challenge than everyone encounters: losing trades.
Even if everything goes right during a trade- meaning you make all the right decisions and see every signal correctly- it’s still possible for you to lose money.
First, let’s go over two common misconceptions about why traders lose their trades: they were impatient and entered at the wrong time. Most people who trade will tell you that this is the cause of their losing trades, and I’m here to tell you that they’re wrong.
It doesn’t matter how long you hold a position for if your entry wasn’t correct, and it doesn’t matter when or why you decided to enter a trade if your stop loss got hit before your intended target because of market conditions.
Yes, impatience could cause one to go broke from not waiting for the right moment to enter a trade, but no patience would help someone reach their goal if they entered at the wrong place or time.
Trading Forex is a fascinating proposition. The sense of adrenaline that comes from a big win or a steep loss can keep traders coming back for more, but it’s essential to take the emotion out of trading and only trade on facts.
Investing in Forex can yield some of the most incredible profits you will ever see, but losses can come quickly and easily if you aren’t careful with your money.
What are some ways to avoid losing trades?
Avoid “risk-on” trading
Traders who get caught up in the moment may make reckless decisions when risk appetite is high, which could cost their entire account in one bad trade. Not all news is positive, and not every market trend will go up forever.
It’s important to remember that there is a time and place for every trading style, and chasing the market when it isn’t going your way will only increase your risk of losing money.
Tighten stop-losses when the market goes down
It would help if you were looking at how much you stand to gain from a potential trade before anything else, but it doesn’t hurt to adjust other parameters for safety as well. If you have a stop-loss set, then lowering the level once the market has been tanking can help you hold on to those smaller wins until they accumulate into something worth holding on for.
Don’t trade in pairs overly filled with risk.
Picking up trades in pairs where one currency is overly saturated with risk can be a dangerous game to play. Sure, the market may be going up for now, but which currency is going up and which one is going down? If it’s the over-saturated currency that continues its ascent, then you have suddenly found yourself in a losing trade without even realizing it until it’s too late.
Take breaks from trading when necessary
If trading is becoming an emotionally charged issue for you, if you are constantly taking losses no matter how “safe” your strategy seems to be, or if you need a break from staring at graphs all day, then perhaps taking periodic breaks from trading altogether will do your nerves some good.
You could set aside one or two days per week where you don’t look at or think about trading and then start up again when you feel able and refreshed.
Bottom line
There are several ways to avoid losing trades, but the most important thing is to be aware of your weaknesses as a trader and constantly improve upon them. Trading can be hazardous if not approached with care and caution, as taking one bad trade could cost you everything.
As volatility is inevitable, it’s essential to identify those who make irrational decisions in the heat of the moment and those who will need lower risk parameters before joining their trading group. Still, trading losses don’t have to be.
