LOSING STREAKS
Losing streaks can happen to anyone and more than likely will happen to everyone. Even the best traders are only right 60% of the time. The key point here is to stick to your trading plan.
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The majority of traders who have a few losing trades abandon their strategy and look for new ways or strategies or trading plans. Losing is part of the life of a trader, it’s a game of probabilities and losing is part of that. You need to stay positive and stick to your trading plan and ride out the losses.
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It’s very easy to chase the money you’ve lost and make silly mistakes or want to jump straight back in the market, but these are all mistakes where you aren’t thinking about building confluences for a trade or applying correct risk management. You’re not in control of your emotions. The best thing to do is relax, go for a walk and come back with a fresh head and every time you take a loss, just remember you’re closer to your next win.
Remember 20 loosing trades out of 100 is great.
Stay disciplined.
These are some real examples of some of our particularly bad weeks trading. Everyone has them, it’s part of trading.
Doubling up on losing trades.
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Many traders have a bad habit of entering losing trades to make back some of the money when their trade goes into a loss.
Do not do this.
You are doubling up on your losing trade here in the hope it goes back the way you want it to.
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This not only destroys your strategy, trading plan and risk management rules but it’s a quick way to blow your account too.
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Even if the market finally does turn around, you’ve now tripled your losses and you might not be able to hold any longer and will probably end up taking the loss anyway. We know which loss we would rather take.
Apply your stop loss and leave the stop loss
Your stop loss is your safety net. Worse case scenario is: your stop loss is hit and your taken out the trade at the price which you have already determined.
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Place your stop loss and leave it alone. Never adjust your stop loss just because price is getting close to it and looks like it’s going to hit it. As soon as you do that you’re tampering with your risk reward ratio and money management rules.
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Say you have a risk reward ratio of 1:1 and suddenly price is approaching your stop loss and you think “Il bring the stop loss away from price so it’s not hit”. Price could still continue on to your new stop loss and then what? You move it again? This is the a terrible situation to be in, you look at the trade which you entered at a risk reward ratio of 1:1 and it’s now 4:1.
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You’ve risked 4 times the amount you want to gain. In percentages, you risked 3% initially to make 3% but you’re actually risking 12% to make 3%. 12% on one trade is a crazy amount but easily done if you get distracted and don’t stick to the rules.
Just to reiterate. Don’t move your stop loss!
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Moving your stop loss is one of the biggest reasons why so many people fail in this market. They move it thinking it will turn around: it never does and one of those bad trades probably wipes out 4 of your good trades where you stuck to your rules.
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The only time you would ever move your stop loss is when your trade is in a good amount of profit and you want to furthermore minimise risk by moving your stop loss into profit. This is the only acceptation of the rule.