Everybody loses sometimes in Forex trading, as in life, and that’s not an issue. As long as you are winning more than you lose, you are doing ALRIGHT.
It’s NOT OK in case you are losing more times than winning. And it’s WORSE if you don’t know how put a stop to your losing and start winning again.
If this is happening to you, use the following two-thronged strategy to get back on the track quickly—and stay on it for most part of your life as a trader.
Part 1 – Control the Mind, Instead of it Controlling You
Emotions and trading don’t make a good mix. In fact, mixing both is recipe for disaster.
Most traders suffer losses because they let their emotions get better of them. They do ‘emotional’ trading instead of disciplined, controlled trading. They do so because the former is easier and more excitable.
There are two options available to you as a Forex trader:
1. Let your emotions decide how you trade, on what you trade, and when you trade—and lose a lot MORE than you make.
2. Use your good judgment to trade, practice strong discipline and show great patience—and make less but CONSISTENT money in the long run.
If your aim is the latter, you should master the Forex Trading Mindset, which has two important aspects to it.
Follow the best Forex money management practices
There are two money management practices in regard to Forex trading that you can’t ignore:
- Don’t risk more money than what you comfortably can per trade.
- Don’t overtrade.
The tension and stress is obviously greater in trading if you are risking more money than you should per trade. The tension becomes manifold greater when you suffer a loss on a trade on which you invested too much money.
The loss marks the beginning of a vicious cycle in which every time after a loss the trader risks even more money to cover up for the previous loss. This cycle continues till he or she completely runs out of money.
AVOID this emotional trading by becoming a disciplined trader.
Overtrading is the other way to mismanage the trading money. Most traders lose money in the long run through Forex Trading and most traders overtrade. Can you see the obvious link between the two?
Overtrading is nothing but gambling. And gambling is the sure shot way of NOT making money through Forex Trading.
The two best ways to ensure you don’t overtrade are:
- Be clear in your mind about what’s that you’re searching for.
- Take a small break after each trade, win or lose.
There’s one more thing you must do: create a detailed trading plan—and paste it where you can see it. This way you’ll know immediately if you tread off course and what to do to get back to the winning formula.
Create and follow a trading plan, plus maintain a trading journal
As said above, creating a trading plan in which you list all your strategies will give you a road map to navigate through the market logically and objectively. Referring to your own trading plan will obviate or, at the very least, minimize entering into trade without any real reason. It will also help you stick to the trading concepts that are effective.
Another thing you need is a trading journal in which you list all the trades you’ve done. This will help you keep track of your trading habits and see if there is any discrepancy in what you know works and what you are actually doing.
Part two – Perfecting the Trading Strategy
Develop mastery over one strategy at one time
Mastering trading strategy is a step-by-step process. You pick one aspect at one time. Once you’ve mastered it, you move on to the next one, and so on.
This is a great way—perhaps the only way—to master the whole of trading strategy. What this approach does is two things: it prevents information overload and gives you the time you need to master the aspect of Forex trading you are currently learning.
Be a trading ‘Sniper’, not a ‘Machine Gunner’
Mastering a trading strategy is only one part. The other, and more important, part is to implement it AS YOU’VE LEARNED IT.
Often traders fail at the latter. Even after learning and mastering a strategy such as price action, they lose more money than they make because they fire ammunition (that is, money) at everything that moves, just like a machine gunner in the military.
What they must do, instead, is act as a sniper does. Wait for a high-probability target, and once it shows its face, fire at it unhesitatingly.
Focus on daily charts
The probability of a trade setup falls as the time frame becomes shorter. And that’s why you must focus on daily charts only, at least early in your trading career. Always remember that in trading, LESS IS MORE.
The wise thing to do when losing money in trading is to focus solely on daily charts and do demo training again until till you truly master a Forex trading strategy such as price action.