Thursday, June 29, 2017

How To Never Have a Bad Trade

winning forex tradeWow, seems like an awfully bold statement doesn’t it? We’ve heard time and time again that the Holy Grail System is a fantasy, that perfection only exists in the outrageous claims of currency trading charlatans with promises of easy profits if you’ll just buy their system!

I can assure you, that in my trading career, I’ve looked for that holy grail. I was desperate to find the previously unnoticed method that I could secretly exploit and soon be fabulously rich. The truth is that traders who are constantly looking for a strategy or system as the primary mechanism to becoming profitable find that this quest is like trying to find a pot of gold at the end of a rainbow. The closer you get… the farther away it becomes.

When you look carefully at the majority of the systems being sold, or the courses being taught… by an overwhelming margin, they all claim very high percentages of winners versus losers. How many times do you see an ad for a strategy that says, “75% winners”, or “23 consecutive winning trades”! And, of course, every one of these are substantiated by being so-called back-tested over 12 years of data… blah, blah, blah!

The reason for this is because 99% of all currency traders have a comfort level with winning and they cannot come to terms with losing. The predominant mind set is that if I can just find a strategy with a high percentage of winning trades, I’ll be successful and my account will grow. At the face of this argument, it really does make sense doesn’t it? Of course if we win more then we lose, we’ll have this forex trading thing figured out and we will soon be trading full time for a living.

Here’s where this thought process gets us in trouble… first, forget about the fact that often times the most profitable systems have a winning trade percentage under 50%. You can also disregard the notion that maybe there is merit to a low probability / high reward set-up in this discussion. Even though both of those statements are absolutely true, that is not where I am going with this.

The point I’m trying to make is that being a profitable trader means becoming a good loser. It is imperative that losing must become an expected, almost welcome occurrence. Why would a trader welcome a losing trade? Because a good trader knows and has confidence in his system. This allows him or her to look at a loss as a stepping stone, rather then as a stumbling block. The new and aspiring forex trader who focuses on a high win ratio also fears the inevitable losses that are bound to happen. This fear then grips the trader into an unpleasant yet predictable pattern that begins with hope, then fear, then devastation, and ends in total surrender.

So if all of these assumptions are true, how can we as forex traders learn to deal effectively and professionally with losses? And, how in the world can you trade without ever having a bad trade? The answer, though logical and incredibly easy to follow is very rarely done, but here it is…

The secret to never having a bad trade is by planning your trade and then trading your plan. Look, no one would ever consider opening a business without a proper business plan. Your trading business should be no different. If you have properly back-tested your strategy and you know that as long as you follow your rules without hesitation, then win or lose, that trade is a good trade. By knowing and having confidence in your trading plan, then your definition of a good trade will not be based on whether it made money.

It will be based on the fact that you traded your plan according to the rules of your system, and you understand that the profits are what you have in your account at the end of the month, not on each and every trade you place.

Previous post:

Next post: