I wanted to take a few minutes and talk about losing trades. We all get them from time to time. How do you deal with them? If after a string of losers after some winners, do you give up? Throw the towel in and say "This doesn't work" then look for yet another trade model to find?
This was a trying month for me personally, financially and mentally. Why? The Eurusd went into a consolidation on the 15th and 16th which caused me to take the longest string of losers I have ever had the joy of experiencing. Some of you took them with me. I wanted to talk about these because most people NEVER talk about the loser's they take, only the winners. I want full disclosure, good or bad, I want you all to know what is happening, the mistake I may or may not make. Your never know when or what can be learned.
My personal view when it comes to trading is to not focus on the money associated with the lot size. If I take a losing trade, it will cost me anywhere from 36 pips to 100 pips. The dollar amount of those pips do not matter to me because I know my trade model to be profitable over time. You all hear us talk about having a positive RR ratio of 2:1 or better. This means to me that I can take 2 losing trades before I am at the original account balance.
I wrote an article about having the right ratio here: Euodootrading.com
Following the proper ratio helps me stay focused even when I have to take a losing trade. When I catch a runner or a winner, I let it work and pay me as long as it wants. We all heard the saying "Let you winners run," the real question is Do You?
Losing trades are apart of trading. If you can't take a loser, then... I don't know what to tell you. Now, I can take a loser, I can take two losers in a row, 7 in a row and I'm feeling a lil sick. I still have faith in my trade but there comes a point where I have to either step away, stop trading or look closer at what is going on. When I have to take that many loser's in a row on the Eurusd, then I know its in a tight channel, at some point it is going to break out and run like crazy. I have to be prepared to make my money back, and that is exactly what happened this month. We took some losers or quite a few losers for that matter, but was able to make them back and be in profits to end the month. THAT is the power of having a positive risk to reward ratio.
I do take losing trades, its how I manage my winning trades that more then make up for a loser. Proper management of risk, positions and reward ratio all play key factors in being profitable.