Forex Trading: Changing Defeat to Victory
Defeat is sometimes painful. Especially “defeat” that occurs when you make transactions in forex trading, or loss. Of course, because that means you lose some money swallowed by the market. Certainly not an encouraging thing.
But you also of course often hear motivational sentences like this, “Great people are not people who never fail, but people who can always get up each time they fail.”
So, you don’t need to be discouraged if you experience losses once or twice. What determines whether you will come out as a winner or loser is how you learn and receive a “punch after punch” then with a certain strategy turn it into a glorious victory. Yes, trading is like that. Several times loss is very common.
Of course, to turn things around is not something that can be done instantly. Sufficient knowledge, patience and discipline are needed – of course – adequate capital strength.
Here are some things that you need to pay attention to as provisions in an effort to change “defeat” to “victory”.
Cut-Loss ? Immediately close your trading platform
A common mistake that is often made by a trader is to let his mind be controlled by the feeling of “revenge” after experiencing a loss. He wanted to immediately repay the defeat he had just experienced, so he hurriedly looked for opportunities to reopen the position.
Defeat is painful, but you must be aware that every decision must be made with a cool head. From our experience, it is difficult to remain objective in making decisions in trading if our conditions are emotional.You will tend to miss some important points in your analysis because you do not want to miss the opportunity and want to immediately “pay” your defeat just now. This is dangerous, because if so then it is likely that you will again experience losses and further burden your thoughts and feelings.
So the most appropriate step is to immediately close your trading platform after experiencing a loss. You can only fight again if the past losses are no longer imagined when you want to make a transaction.
Reset Trading Plan
In this case, what must be rearranged is the risk limitation in each transaction. If you have set a risk per transaction – for example – is 5%, then apply 5% of the last capital position you have.
For example, if the previous capital is $ 1,000, the 5% is $ 50. After experiencing a loss, your capital becomes $ 950. So if you want to trade again, the risk limit is $ 47.5. Now, with a capital strategy like that, you will have more “bullet reserves”.
Based on the table, you have a “quota” of 10 (ten) “shots” before the total loss reaches the maximum risk limit. That too if the ten transactions that you do end up with losses.
Noteworthy is that if you trade in a normal style (eg swing trading ), then the “reasonable” risk limit stops at the 10th transaction. Why? Because the smallest ” swing ” that occurs in the average forex price movement is in the range of 300 pips. If you enter a position with 0.1 lots, that is equivalent to $ 30.
Compare this to if you use funds that are smaller than that, for example $ 500.
It is seen that with a 5% risk per transaction, the specified risk limit is very “tight”. In the first transaction, your level of freedom is only 250 pips. For forex , the risk limit like this is very narrow. Only can be done by those who are very experienced in scalping and of course have a high “flight hours”.
To be able to trade in a normal style, you have to increase the risk tolerance per transaction to 10% (ten percent) . Thus, your risk tolerance becomes a little more “relieved” at least until the 6th transaction. Passing from the 6th transaction, your trading has entered the “yellow light” area. In addition to the risk tolerance becomes increasingly narrow, losses that may be suffered exceed the maximum risk limit that has been set. Watch Out.
Thus it appears that the greater your capital, the more “bullet reserves” you will get. It also shows that the smaller the capital, to be able to trade comfortably, the risk per transaction is even greater (10% versus 5%).
Sometimes we experience losses due to our mistakes interpreting charts, signals that arise from the trading system, or even errors in calculating position size. For that, it’s good for you to evaluate what causes you to experience losses.
Have you run a trading plan well? Have you really checked & re-checked the signals provided by the trading system? Have you really calculated the potential risks? Is there news that significantly affects the market?
The questions will later become the basis for you to assess whether the loss you are experiencing is good loss or bad loss. If you have done everything correctly but still have a loss too, then that is indeed part of trading risk which – once again – is very common. By getting used to evaluating, you will be able to improve your trading skills.
So, have you just experienced “defeat”? Don’t worry, it might be the start of the victory. Keep the spirit.