When to close a loosing trade!?
I know how many of you have bad experience with your loosing trades, which can become a total nightmare if you don’t react on time. At first, I can write that the most secure way to avoid a huge loss is to place a SL at each one of your trades. I know, you think how market collect’s you SL’s all the time and that can be true, but without it, you’re gambling, not trading. Why? Because, if you don’t trade with SL you don’t have a strict risk management rules, which is the most important rule in trading. I mean, you can’t and you will never know how much money you can made in a single trade, in a day or within a week, month, but surely you can and you must know how much money you can afford to lose in a single trade or within a day or more. It’s pure fact as you don’t have the ability to move the market.
As I wrote for several times in my articles, losses and losing trades will determine you as a trader, not the winning ones. You will learn nothing from the winning trades, but from the losing ones, woow, you will learn much, you will learn everything. If you don’t learn, you will fail each time when you trade. Too much quick loss will cause you simply too much troubles in trading and you need to avoid it in every way you can. How can you do it? Simply with strict risk management by using SL or simply by closing your loosing trade on time, I showed for several times here how I trade and how I close my losses, I am ruthless. If I wasn’t, I was wrong and I lost everything eventually each and every time in my career.
It’s of the most importance that you understand how trading without losses in apsolutelly impossible. That means how you will always have them. How small, big or large will be it depens on you and only you. That’s how when you and if you trade without a stop loss, you need to know the point from which your floating loss will become stressfull to you. If you find yourself in a situation where you pray for the return, well, you’re gone too far and trading will become an agony. We all react different on risk and there is no rule on how much risk you will feel confortable. Someone can easily handle 20 or even 50% risk, while the other one will fall apart psychologicaly on 5%. I know that because I talked a lot with traders around the world for years. In my point of view, this mostly depens on your financial situation and money that you can afford to lose. Sure, this could be a trap as well, cause someone who is not afraid of loosing can lose too much, but on the other hand, it’s far more better in trading not to be afraid. You all know how this works by trading with demo accounts, right!? Nobody feels a fear and almost everyone wins, big time. When it comes to real accounts, everything changes, right!? You are afraid to lose. To be worst, here on forex each time when you open a new trade, you can lose and you’re aware of that. It’s on you’re mind constantly and that can ruin your trading from the beginning.
There are several warning quotes for this theme, coming from the best traders around the world;
“If you can’t take a small loss, sooner or latter you will take the mother of all losses”ED SEYKOTA
“The elements of good trading are; cutting losses, cutting losses and cutting losses”ED SEYKOTA
“Cutting a losing trade quickly clears your head and restores your objectivity”MARTY SCHWARTZ
That’s why, knowing a psychological point of your stress will be of the most importance. If you reach the same, you will fail. That’s how, you need to close your losing trade on time. You need to close it on a level of, let’s say, easy return in a next trade. Simply close it and move on calm and relaxed, you will be in chance to return the loss easy, you will surelly find a way. Remember this. There is no worst situation then when you have a huge floating minus, praying for the market to return in your direction. Sometimes it will happen, but believe me, most of the time it will not and you will be done with trading for months.