Know These Shocking Facts That Can Make You Lose In Trading
Even experienced traders make losing trades. No one can become perfect. Losing is part of the game. If you use technical analysis to make trading decisions and always look for the perfect trading signals than the number of trades that you maybe able to make may not be that much. You see, even professional traders know this fact that there is always a diminishing return to the ratio of winning trades. You will always lose some trades and win some trades. The art lies in learning the skill of making more winning trades as compared to losing trades.
So when you make a losing trade, what you need is an anatomy of the losing trade so that you know there is nothing wrong with your trading strategy. What can be the reasons for a losing trade? The most important reasons can be: 1) Bad entry, 2) Bad Stop Loss Value, 3) Bad Profit Limit Value and 4) Breaking News.
Let’s discuss each factor in detail to know more on how a bad trade takes shape. The most common reason of a bad trade is making a bad entry. This is obvious, if you are wrong from the very start, you cannot do anything about it. Now, do you know this shocking fact that many traders make a bad entry just by mistake when they click the wrong button like when they wanted to buy, they click on the sell button by mistake. Yes, this happens to even to the experienced traders too, the most obvious cause is distraction or fatigue. You migh even enter the wrong number of lots for the trade in a hurry. You never know! So don’t try to rush when you are trading. You need to make a checklist of things that you need to do before entering a trade just like pilots do when they fly an aeroplane. Use that checklist to check that you have entered everything correctly before you click the buy or sell button!
There is always a tension between your need to limit your losses and the market’s need to move up and down most of the time for no apparent reason. If you try to limit your losses too tight, the market may constantly throw you out of your trade. So you never know, you will have to learn the art of constantly moving your stops. Another way is to not use static stop losses rather go for a dynamic stops.
The last common reason of making a bad trade is trying to be greedy with a big profit margin. You want to make good profit from trading. This is what everyone wants. But the markets cannot be dictated. You cannot tell the market, hey, give me this profit. Markets don’t listen. What you need to learn over time is to take what market gives you without grumbling. What good traders do, they avoid the markets when they are in a bad mood. So, someday the market may be offering you a good chance, grab it and make a good profit. The other day, market maybe in a bad mood. Just take what the market gives you. Then the last reason for a bad trade is sudden breaking news. You cannot do anything about it. This is something out of your control. When there is a sudden breaking news, you don’t know how the market will react. Simply stay out of the market!