Do same things trading forex, expect different results

Do same things trading forex, expect different results

Have you been doing the same things trading forex again and again and trade with losses, day after day? You think tomorrow or the next day you will be profitable? Yes, it is possible, but try it for one month and I guess your month balance will be negative.

If you are trading without any scheme and principles, just pressing buy or sell – you will never be profitable.

When I started forex trading (it’s ridiculous to call trading forex, it was just gambling) my thoughts were only about success and a beautiful life. I was trading using support and resistance only. From the first sight, it’s not a bad style to trade, but all of my trades were against the trend, that means I was selling at the top and buying at the bottom. For many it can appear a typical forex trading style. Of course, my wrong primary habits were that I was entering my trades without any confirmation, risk management, and money rules. That implies that I was looking let’s say for 20 pips, but my losses could be 20-30-40-60-80 pips. If we speak of money management that is a disaster, let’s imagine I have three gains with 20 pips, together it would be 60 pips, but without good money management, it is possible to wipe away all your gains with one bad trade. It was my biggest problem, with one loss I was giving away all of my profits and even more.

Another terrible habit was not to know how much I can lose in a single trade. It was at random, but after I closed my trade or got stop loss I experienced that it was let’s say -20% of my deposit.

After that I was blaming the market, brokers, but not myself. I was trading forex as I wrote above, later I had some brakes, and then I started again. After one year of trading, I thought that it is impossible to make money in this market. As I understand now, I guess I was correct about one thing – it’s inconceivable to earn money with my trading habits. I realized this approximately three years ago. My currency trading evolution.

Let’s see a simple example below. We have EURUSD daily chart.

EURUSD

If we trade using support/resistance, in this case, it is resistance. The red line shows the first resistance level. Let‘s say it is an opportunity to sell, but we can see that this level is not holding, and the price keeps running. Orange line shows us second resistance, and it is the same story, we are willing that this level will hold and we, of course, end up with losses.

Here we have two scenarios:

1. If we use risk management, and we lose 20-30 pips, it is not a big problem, we just got stop loss.
2. If we don‘t use risk management or even don’t have it, we trade without stop loss order, or we are moving it above when we see that it can be touched. Let‘s go to another example, first resistance was near 1.1435, second near 1.1465, but price stopped moving up and reversed only near 1.1710, it’s about 250 pips. I think you can imagine what can happen if we don‘t use strict stop-loss orders. Margin call or dramatic loss of your deposit, let’s say 30% and more is possible without a rigid system.

So if your trading generates losses, you should overlook all your trading history. Don‘t anticipate that with same trading habits one day your losses will become profits. Often newbies or even traders with experience need to change everything in trading and create a new trading style and create money management rules. Remember in the financial markets long run is greater than one specific trade.

[fbcomments]