A trader can be in a trade that goes down but is only a little against him. He has his stop on at a comfortable level but he knows the trade is wrong but stays in because the stop has not been hit. Since he has not been stopped out he holds on thinking it is a good trade. Since he has his stop set he thinks he is on the right side of the trade. This can be dangerous thinking.
When you are in a trade and it is not going the way you thought it should and you start to feel uncomfortable about the trade get out of the trade and forget about what you thought was a good trade in the beginning. Just because you have not been stopped out does not mean you are safe. You don’t need to wait to be stopped out take a smaller loss and get on with the next move. If the trade starts to look wrong then get out no matter if you are a little positive or a little negative. This can save you a lot of money in the long run.
If you placed a trade because of a market movement and some good signals but the market fails to follow through and starts to linger exit the trade. There is no need to wait until the market hits your stop level to get out. If it isn’t working as it should, odds are that eventually it will hit your stop so why not take the small loss now and look for another trade. Exiting trades when the reason your entered the trade has changed is good money management. It is also a sign that you are maturing as a trader. You are in tune with the market and will probably make money on another trade that is just around the corner. If you can cut your losses by 25% you are way ahead when the good moves come along for a pip saved is a pip earned.
When a trader first starts to trade there are many things to learn like:
1. How to use the platform
2. Which trading style I should use
3. Which indicators should I use
4. What time frames best meet my life schedule
5. How much money should I trade with
6. How much should I place on each trade
7. How much of a loss should I take
There are many other things to consider when trading but the one I want to address here is how much money you should risk in the market at one time. Here is one formula of how to calculate the amount of money you may want to trade at any one time.
There is an old saying that says you should “let your profits run”. In regards to this there are two schools of thought. One: this is good advice and it should be followed. Two: it is better to be consistent and follow your system and take several trades out of the long run. The down side of letting the winners run is that you lose perspective of what is average. The really big winners do not come along that often. By staying away from all of the big moves and stick to your trading plan you will not become confused as to whether it is a big move or an average move. By sticking to your trading plan then you can keep your mind and your capital free to make the most of several trades over the life of the larger trade.
A good method of trading is to be consistent in the way you trade even though you will take small losses once in a while. By trading the same way every time, you will have a better chance of seeing your account grow on a steady bases. When you do this, you are freeing up time and money that can be spent on other average trades—trades with which you are familiar and know how to handle without panicking. In the end this should prove itself more profitable.
All the above information just means that you need a reliable system with as many positive trades as possible. It would be better if the system gave signals to enter trades from indicators rather than candlestick movement. The system should also work on any currency pair and in any time frame. This holds true for when the market changes and moves in a different way. It is our opinion that once you become a good trader you will know how to trade the big moves and make additional trades for smaller numbers of pips as well as adding on to the big move to maximize profits.
When studying traders that seem to have it all together learn concepts do not try to copy exact.We want to know what they did and exactly what happened.That is good in trying to learn but do not compare yourself to other people; Just compare yourself to your own efforts.
Yoga students do not compare them selves to the other yoga students that is detrimental.The same goes for trading.If we compare ourselves to other traders we may not know the real story.They may only be trading demo accounts.We hear people talk about how they made all these pips and it starts to make us feel like we do not know anything.But we do not know anything about the truth of that trader.
There are traders that make livings by making large gains with large losses.Then there are traders that make a living with small gains and small losses.
Which ever style a trader uses they must be aware of what they are doing and keep the size of the wins and the size of the losses in relation to one another.
There are traders that lose money month after month, and the reason is that they always rush into trades without studying them carefully and seeing which way the trend is going or waiting for any sort of retracement before entering the trade.They see a breakout on a currency pair and put in orders to buy, once the order is filled they spend the next hour complaining that they bought the high of the move.They always seem to buy when the currency has had a big run up in 10 minutes.
A trader must see the big picture in trading to survive and prosper. If you only look at the small time frames you are only seeing the foothills of a tall mountain. It is necessary to look at the larger time frames and trade in the direction of the larger trend.
If a trader is going to be in the currency trading business very long they must look at the current trade as only one of many trades. This will help to get out of a bad trade without the emotions.