How do you cope with a series of losing trades?
In this video:
01:08 What We Do As A Technical Trader
03:20 An Important Aspect of Trading
04:00 How To Improve Your Trading
How do you cope with a series of losing trades? Let's talk about that and more right now.
Hi, Forex traders, Andrew Mitchem here, the owner of The Forex Trading Coach and today's video and podcast, I want to talk about the inevitable losing trades. No one likes them, but everybody has them, some more than most. The point of this podcast and video is to try and help you overcome what happens when you have a series of losing trades. For some people, two or three trades could be really bad, some people might be able to cope with ten losing trades in a row.
Whatever it is, it's quite difficult to accept it, but you need to accept losing trades, because everybody, every trader does, no matter how good they are, they have losing trades. Some people have losing days, you have losing weeks. Some even have losing months. Now of course we try and eliminate those as much as possible, but you have to be prepared for that to potentially happen. Why? Well, trading's not an absolute certainty, it's not a given.
What We Do As A Technical Trader
A very technical trader like me, really what we're doing is we're looking at patterns and price action and we're looking for probability, because if it happened so many times before, that we see this certain pattern setting up, then the likelihood is that it's going to be a winning trade X number of times out of ten in the future. Regardless of the setup, you can have a perfect setup and it can still go wrong. Doesn't matter, even if you're a fundamental trader, you can be taking news announcements and trades can still go wrong, so it doesn't matter whether you're a technical or fundamental. You have to accept losing trades as part of the business of being a Forex trader.
How to overcome that?
Well, several tips that I have for you and I've mentioned this so many times before, but the important thing is to have low risk per trade. If you have low risk per trade, you can cope with a number of losing trades.
I'll give you an example. Yesterday I took three trades well actually I took four trades on the daily charts. Three of them got completely stopped out. I have a half percent (0.5%) risk on each of those trades, so on those three losing trades, I lost one and a half percent (1.5%) of my account just yesterday. Not great, but it's the way that trading goes.
I had some fairly good setups, and I was quite comfortable with the setups, they just didn't work out. Again, it's just probability. You can have the perfect looking setup and sometimes it will go completely against you. If you look at your charts on the Pound/New Zealand Dollar (GBP/NZD), for instance, which was one of those trades, the British Pound's been going up and up and up, the Kiwi dollar's been going down and down. Had the perfect setup, we had interest rate news out of New Zealand. There she dropped the interest rate, yet the Kiwi dollar went up.
Of course there's all sorts of reasons why that is in terms of they only dropped it by twenty five points, potentially it could have been fifty and then into the European session, we had lower than expected retail sales at all of the UK, which then dropped the British pound. There was me thinking, a strong British pound, weak Kiwi, in the end we got the complete opposite, the trade got stopped out. I just have to accept that's a part of trading.
An Important Aspect of Trading
The important thing is, is to not change your strategy around just because you've had a few losing trades and it's a really important aspect.
So many people who I get emails from and I speak to, they just, they come to me and they say, “Look Andrew, how can you help me to improve my trading?”
The problem is that so many people have one or two, or three or four losing trades and then they start changing things. They don't have confidence in their system, they try changing things, they start adding something to their system, they look elsewhere. Whatever it might be, and that becomes the issue.
How To Improve Your Trading
My advice is, first of all of course you need a strategy that suits you, one that's profitable of course in the long run and one that suits your style of trading. Once you have that, stick to it, don't go chopping and changing all the time. Accept that market conditions change all the time, but if you have confidence in that strategy, you can see the setups, you're happy to take them, you have low risk, you have high returns per trade when you do get successful trades, then that allows you to have a few losing trades because you know full well that you get a profitable trade and that more than that weighs two or three losing trades.
It's really important to do that. Don't go chopping and changing your strategy, but of course you need a strategy in the first place. If you don't have one, then of course I'm able to help suggest some ideas for you, but what I really do suggest, if you haven't been on them, is to jump on to one of my free webinars that I hold each week for new traders and for more experienced and frustrated traders. Jump on to one of those two and you can just get an understanding of the way that I trade and how that could potentially help you to develop your own strategy and your own way of trading.
That's it for this week and don't be worried about losing trades. Everybody gets soaked, side hit and over the top when they have profitable trades and winning trades, but of course like anything. There's the good and the bad and you have to be able to cope with both without too much emotions coming into it.
Have a great weekend and I look forward to talking to you this time next week. This is Andrew Mitchem from The Forex Trading Coach.