How to Lose Money Fast through Trading

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#397: How to Lose Money Fast through Trading

In this video:
00:33 – You’ll know it’s easy to lose money through trading
01:27 – What are you going to do differently?
02:05 – Watch last week’s video about using Limit Orders
05:01 – A real example on the EUR/AUD W1 chart which made a 4:1 R:R
06:22 – New monthly webinars for all traders to attend
07:16 – We’ve gone full circle

I’m going to explain how you can lose money really, really fast by trading the Forex market. You interested? Let’s talk about that and more right now.

Hey, traders, Andrew Mitchem here at The Forex Trading Coach, with video and podcast number 397.

And you can see it’s an awesome day here, summertime in New Zealand, so I thought I’d come outside. I want to talk about something very, very different this time. I want to talk about losing money.

You’ll know it’s easy to lose money through trading

Now, it’s very, very easy to do that if you’re trading in the Forex market, and if you’ve been trading for any length of time, you will know how easy it is to lose money.

Now, not the sort of topic that I usually talk about, so you can see it’s kind of like tongue in cheek here, because really everybody knows how to lose money in the Forex market. All you have to do is to simply do what most people have always done and just follow the masses, do all the usual things that most people do that are incorrect. And if you do that, you will certainly lose lots of money. But that’s not fun. If you want to change things around, like with anything, if you continue to do what you’ve always done, as the phrase goes, you will continue to get what you’ve always got.

What are you going to do differently?

So as a trader, what are we going to do differently here now to change this around? What are you going to do with your mindset, with your thinking, with the way that you trade, with what you’re going to learn, who you’re going to interact with, all those types of things? What are you going to do to change this around? Because otherwise, like the topic of this conversation, you will lose money and you’ll do it really well and you’ll do it really fast. You’ll get upset. You’ll blame the broker, you’ll blame the internet, you’ll blame everybody, but ultimately it’s you that’s done it wrong.

So yes. Okay, so you’re going to change things around, what are you going to do?

Watch last week’s video about using Limit Orders

Well, have a look at last week’s video and podcast, as an example of one simple thing you can do to change things around. The feedback from that, by the way, thank you for that, was tremendous. It was all about using retracement orders, limit orders, and how that one simple thing can massively change your trading performance.

Now, this week I held a presentation for a group of traders over in Singapore. Of course, it was online. I haven’t been over there. But on that presentation, I put together a very, very simple chart, and I made an example of a trade. And I said, “Well, here’s three ways of trading this trade, entering the trade. We can enter at the market. We can enter using a stop order,” in this example, it was a buy trade, so a buy stop, “or we can enter using a buy limit.” Now, this trade had the same stop loss on all three entry methods, had the same profit target on all three entry methods. It was a hypothetical trade, but it was to show an example, and it was to say, basically what we showed was, if you enter at the market, this particular trade example made about a 1.1-to-1 reward-to-risk. If you entered using a stop order, it made about a 0.6-to-1 reward-to-risk. If you entered using the limit order, it made a 2.2-to-1 reward-to-risk. Massive difference.

What I then did is shared that same example and just said, “Look, if we had 10 trades all with much the same reward-to-risk, and we were profitable on five of those trades and we’d lost on five of those trades, so only a 50% win rate, which is still fairly good, by using the market order you were just a slight bit of profit over those 10 trades. By using the buy stops, you were in a loss over the 10 trades. And by using the buy limits, you were at about a 3% gain.” I think the buy stops was like about a 1% loss, top of my head. I’ve got the figures if you want to see them.

But they were hypothetical trades to say, this is the advantage of using the same trade setup, the same stop, the same exit profit. The only thing that changed was the entry level. Now, it made a massive difference. It was a big aha moment for a lot of all those people on that webinar and just made them think differently, because most people will tell you to enter at the market or a breakout using a stop order. I do the opposite. I say have a limit order in place. If the price retraces first, it gets you filled at better price. All sorts of benefits from that to reward-to-risk, to not needing to be at your chart at the exact time the trade changes over. You don’t need to be there when the price hits that entry level, all those type of things.

A real example on the EUR/AUD W1 chart which made a 4:1 R:R

Now, a real life example of this and a perfect example was this week. On the weekly charts, I mentioned to my clients on Monday to look at a buy trade on the Euro/Australian dollar. It hit the full profit target yesterday while I was on my live webinar with over a hundred clients on there live last night my time. It made a very impressive 4-to-1 reward-to-risk. I took half percent risk on that trade myself. Therefore, I made a 2% account gain.

I also mentioned on Monday a sell trade on the Aussie/Swiss Franc, inverse of the Euro/Aussie. That got stopped there by two pips. It would have gone on to hit the profit target, but it didn’t. It got stopped out. And on that trade, I lost half of 1%. So you put the two trades together, I’m still at a 50% win rate. I’ve won a trade, I’ve lost a trade, but net, I am up 1.5% for the week on those two trades, just on the weekly charts. It took me less than five minutes to place the trades on Monday, and I’ve made 1.5% gain on the two trades, half percent loss and a 2% gain. So again, it shows you the importance of reward-to-risk. It’s a very, very important part of trading.

New monthly webinars for all traders to attend

Now, one other thing to share with you going forward for this year and starting in mid-February, I’m going to be holding a free webinar for anybody who wants to attend, once a month. We’re going to pick a topic each month to discuss. For February, we’re going to be discussing candle patterns. If you’d like to jump onto one of those webinars, just have a lookout for it each month. But if you’d like to join us on the February webinar, all you need to do is just send me an email, [email protected]. Let me know that you’d like to attend the February webinar. I’ll get a link together and I’ll send it through to you. There’s no selling, no anything at all. It’s purely going to be just informational, this upcoming session in February, purely on candle patterns and how I trade them, how I can help you trade them in a practical, realistic, ongoing method to help you make money from the Forex market.

We’ve gone full circle

So we’ve gone full circle. In seven minutes, we’ve gone full circle. We started off talking about losing trades and how you can do that fast. Most people do that, unfortunately. You know that 90 to 95% of people lose money in the Forex market. Be one of the 5 to 10%. Come and join us, or just follow what we do. And look, we love this market. We love trading it for all the benefits that it offers, the lifestyle, the monetary, everything else. It’s a great market once you know what to do. If you don’t know how to trade it, you will lose money and do that fast. If you want to be that, carry on doing what you’re doing. If you’d like to change, you know where to find us.

So once again, this is Andrew Mitchem here at The Forex Trading Coach, enjoying this beautiful summertime weather here in New Zealand. I’ll see you this time next week. Bye for now.

Episode Title: #397: How to Lose Money Fast through Trading

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