Ok guys, the above statement is the main reason why 95% of traders fail while the 5% go on to greater success in trading. Traders in the 5% winning camp have managed to keep their WINS big while at the same time losing SMALL when they need to take a stop loss.
What about the losing traders? Losing traders basically have small WINS (Some with many small wins) but when they lose, the lose BIG. At times losing traders have like 10 wins that rake in a lot of profit but they can lose all of those wins in just ONE single trade, yes, just one single trade.
As such, if we are ever to become a consistently winning trader, we need to be able to take our losses . We have to ensure that we lose SMALL every time we take a loss and try to win BIG when we do have a good trade on our side.
You may ask, “What about winning SMALL and losing SMALL?”. Well, when that happens, more or less you are going to be at breakeven with your account unless of course the frequency that you win small is more, or much much more than the frequency that you lose small. For example; if every win is 30 pips and every loss is 30 pips and you had 3 wins and 1 loss. That gives you 60 pips in profits (90 pips – 30 pips=60 pips). Increase the frequency of your wins over your losses and I think you will do fine.
Of course, the most ideal situation is for you to lose SMALL and win BIG. Let say that your every loss is at 30 pips and your wins is averaging 90 pips. Every win will actually cover 3 losses. As such, a winning streak of 3 wins with one loss will look like this: (270 pips – 30 pips = 240 pips). The profits will inadvertently help cover for future losses, for sure.
I think by now, you get what I mean, you need to take small losses (In relation to your account of course) and try to either (i) Have higher frequency SMALL Wins together with SMALL Loses or (ii) Make BIG Wins with SMALL Loses.
If you continue along the route of (i) SMALL Wins and BIG Loses, you are definitely going to empty your account, sooner or later. ]
Trust me, stick to small loses and start to like taking loses. This is the only way to go if you want to be successful in trading. Make more profits and protect those profits.
Ardy is a Professional Forex Trader specializing in the Forex market. He trades using both Technical and Fundamental Analysis and mentors other traders how to trade the Forex market using proprietary trading strategies which he has developed over the years. He started investing in equities in 1999 and trading Forex in 2008. He is the founder and lead currency strategist @ Forexachievers.com