Even experienced traders make losing trades. No one can become perfect. Losing is part of the game. If you use technical analysis to make trading decisions and always look for the perfect trading signals than the number of trades that you maybe able to make may not be that much. You see, even professional traders know this fact that there is always a diminishing return to the ratio of winning trades. You will always lose some trades and win some trades. The art lies in learning the skill of making more winning trades as compared to losing trades.
Now let's get down to the brass tacks. When you lose a trade, you need to go into the detailed anatomy of that losing trade. You should keep a trading journal. In that trading journal, always enter each trade and try to analyze it afterwards. Even if you make a winning trade, try to analyze did you exit at the right time, could you make more profit. When you do into the anatomy of a losing trade, try to find out whether your trading strategy is sound or you need to change it. Now, what can be the most obvious reasons of losing a trade? The most common reasons for losing a trade can be: 1) Making a bad entry, 2) Placing the stop loss in the wrong place, 3) trying to be greedy with a bad profit target and 4) of course the sudden breaking news, something out of your control.
Let's analyze each of these factors to see how they can make you lose your trade. There are many reasons for a bad entry. The most obvious and easy reason can be you clicking the buy button when you wanted to click the sell or the other way round. Yeah, this happens with the experienced traders as well. This can happen due to distraction or fatigue on the part of the trader. You might enter the wrong number of lots that you want to trade. So don't try to hurry in a trade. Make a checklist and always use it before entering a trade.
The second most common reason for making a bad trade is placing a bad stop loss. You see, there is always a tension between your desire to limit your losses and space the market needs to move up and down without any reason. What you call noise! If you place too tight a stop, noise in the market will constantly trigger your stop loss and take you out of the trade. What you need to learn is to how to manage your stop loss. You can move your stop loss as the market moves. This is one way of doing it. You can even use dynamic stops, another way of doing it. Using trailing stops has it's own merits and demerits.
The last common reason of making a bad trade is trying to be greedy with a big profit margin. You want to make good profit from trading. This is what everyone wants. But the markets cannot be dictated. You cannot tell the market, hey, give me this profit. Markets don't listen. What you need to learn over time is to take what market gives you without grumbling. What good traders do, they avoid the markets when they are in a bad mood. So, someday the market may be offering you a good chance, grab it and make a good profit. The other day, market maybe in a bad mood. Just take what the market gives you. Then the last reason for a bad trade is sudden breaking news. You cannot do anything about it. This is something out of your control. When there is a sudden breaking news, you don't know how the market will react. Simply stay out of the market!
Author Resource:-
Mr. Ahmad Hassam has done Masters from Harvard. Give 60 days RISK FREE try to this Flexible Forex Day Trading Course by Bill Poulos that teaches trading not more than 20 minutes each day and reaching a 5 figure monthly income. It also comes with 8 weeks FREE personal coaching by Bill! Discover a Forex Trading System with an ROI of 2956.16% per month.
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