Losing trades are part of our job, but…
How much we lose when we are wrong, that is the most important thing in our decisions. I usualy said, cut you’re losses quickly and let you’re profit runing, but it’s not so easy to admit you’re self that you’re wrong, right!? Well, you must do that and with no delays. For so many times in my forex career I’ve made mistake by losing to much, after wich there was so hard to recover, most of the time even impossible. That’s why you must have you’re risk management at the highest level, almost at 100% all the time. Not only that you have to be disciplined and stick to your low risk plan, but you must be quick in you’re decisions when you realize that you’re wrong. It’s better to cut you’re loss at 0,50% then lose 3,0% or even more. I don’t need to tell you why, right!?
I am more then surprise when I see that traders are having risk/reward ratio of 1:1 or 1:2 in their strategies. To me, it’s similar to gambling. Because, you can make a few mistakes in a row with no problem and how much profitable trades you must have to return at the beggining after that? To many! You’re RR ratio must be at least at 1:3 and that’s also to small ratio based on my experience. I am using mostly 1:5 or bigger. It’s not that you have to wait you’re target at all cost. Sure that you will close you’re good positions if you’re target is unreachable and it can be for various reasons. But, when you make money, try to make it big. Because, when you make a good trade with let’s say 1:6 RR, you will have a reserve for the next 6 entries in to position. And that’s is what matters here. In each trade we must take a risk and for taking the same we must have a capital. Make it with you’re winning trades! Move you’re stops always above the entry when you can, because you’re SL in the positive teritory is winning trade as well.
Collect you’re positive trades and make them big, cut you’re losses and make them small!