So you’ve just started gaining more and more consistency. The best winning streak ever! Your emotions are heightened and you’re feeling on top of the world. You decide to open your next trade, you get brave and next thing you know, you’ve managed to lose all your accumulated profits on one wrong trade. Sound familiar? Don’t worry; it happens to every forex trader on more than one occasion. This is how you avoid this from happening again.
First things first and I cannot stress this enough. Change the way you see your profits and losses. No longer see them as monetary gain or loss. See it as a percentage gain and percentage loss. By removing the monetary value you are able to trade based on an unbiased emotionally free environment -You win some, you lose some.
Pips pay the bills, another psychological trick that eliminates greed is targeting a certain amount of pips per day, week, month, and overall year. Some pairs are very volatile, especially during the market opening. Take GBPJPY for example as seen on numerous London market opens, GJ can impulse price plus/minus 50 pips in a matter of minutes. You can take advantage of this by identifying repetitive movements on a pair which can be very beneficial to your consistency, which in turn gives you more profits to reach your target, and withdraw.
Imagine only trading in the market open, one trade, for a few minutes, one pair, 10 pips profit secured, and having the rest of the day away from the charts. We all know how staring at the chart can negatively impact our decision to execute, exit, or enter the trade. That is what every forex trader, funded or not, works towards!
Stop closing trades prematurely, and stop editing trades based on emotions. Once you’re ready to execute the trade, provided you’ve done your analysis, set your stop loss and take profit and leave the trade alone, even if it goes against you. If price starts heading to your stop loss, let it hit it. If you end up closing the trade prematurely, you basically reward yourself for bad behavior.
Instead, once it hits, evaluate why and where it went wrong and how you can learn from this mistake, whether it be entering too early or too late, a volatile news event, or some nonsense trade. Lose and learn! The same goes for your take profit. Also, by not letting it hit your stop loss or take profit, you are tampering with vital information that you could be using towards your backtesting journal.
What are your thoughts on this topic? Have you ever had a strong consistent run, only for you to take one brave risk and have the market move against you, eventually taking all those previous profits, within minutes?
Let us know below, comment your opinion.