I don’t believe that there isn’t any doubt that if your psyche or mindset isn’t right with regards to how you deal with losing Forex trades or even being caught in a draw-down it can and most likely will wreak havoc (and in some case) devastate your Forex account and could lead to the demise of your Forex Trading career.
Most of the 95% losing Forex Traders go about trading wrongly. They enter the area, the shark infested waters, unknowing as potential shark bait. They are lured into the waters with glitter and glamour of hitting the proverbial jackpot of unlimited riches and nothing could be further from the truth. I wrote about this in my last article “Can I turn my Forex Trading Around in 30 Days?”
News flash, don’t you realize that YOU are out there in the Forex market (trying to) compete with the largest, most well funded businesses in the world (Banks and Forex Market Makers)? The cards are stacked up against you, before you even hit the buy/sell button. These guys hire the best, smartest, most well trained individuals that live, drink, eat, sleep, and breathe Forex trading and you think your week or two of Forex trading is going to allow you to beat them consistently? Hello! That’s why 95% of Retail Traders are in the sad state of affairs or classification of being labelled “Losing Traders”.
However, I am here to tell you that you don’t have to be in the “Losing Trader’s Club”. One of the most simplest things you can do is learn to let go of negative feelings of losing trade. Probably the best way of doing so is when you are in the back-testing phase of any trading strategy. In fact, if you’re going to make mistakes, and make losing trades what a better place than a Forex trading simulator? Now of course you should as much as you humanely possible can be trading in the Forex Simulator as though would be trading live. No you’re not going to have the excitement and rush that you have when your live money is at risk on the table. However, you can trade (with back-testing) in a manner that is consistent or will be consistent with your trading style. Doing so religiously will even help you achieve better results. What I am basically trying to say is that when you’re back-testing take it seriously. There is no need to develop bad habits while back-testing because as soon as you begin testing your system or strategy live or demo you can be sure those back-testing numbers are going to plummet 10% or more. That’s the reality and you need to understand and prepare for that reality.
Secondly, you need to let go of the negative feelings of losing any given trade and here’s how you do it. First, don’t have any vested interest in any one given trade in the first place. Sounds simple, I know, right? Wrong. Most Forex Traders make this mistake from the onset when trading. They have some invested interest, that “This is the trade!”. This is the one. It has to win. It’s going to hit my target. When you go into trading Forex with that mindset, you’re already going in with a losing mentality. If you’re not able to walk away from your trade(s) after placing them. Something is wrong from the start. You’ve put too much at risk. You’re not confident in your trading system. You’re not confident in your analysis. You’re not confident in your trading abilities. Don’t you know that it take other people to see what you see and AGREE with you in order for the market to move in your direction. No single person has any control on making the Forex market move in any direction, no matter how much you stare and look at those candles. So understanding this, the best thing we can do is not to have any vested interested in any trade from the beginning. Then, and only then will it be easy for you to let or release any negative feelings on a losing trade. In fact, (here’s my philosophy regarding trading): “Some will, some won’t, so what!” Some will (win), Some won’t (win), So what! NEXT. You see you’ve got to get through the losing trades to get to the winning trades.
Forex trading is a numbers game. Pure and simple. Sure you’ve got to first show up equipped to participate. Most (Traders) show up ill-equipped and ill-prepared before the first shot is even fired. What are your numbers? What is your Expectancy? What is your R? What is the win/loss rate for your trading system? If you don’t know, then why in the world are you even trading? Do you even have a Trading plan developed that covers these issues? I suspect that most LOSING Forex Traders don’t know their numbers and of course don’t even have a Forex Trading Plan in place, let alone back-testing their system to see even if it’s safe to enter the Shark infested waters.
There is a thing in Forex called a win/loss probability. So it goes without saying that you’re gonna win some, you’re gonna lose some somewhere down the line so you’d better learn to deal with it or stop trading and again the easiest way to develop this mindset is to (1) learn to make your mistakes in back-testing. (2) learn to first and foremost don’t have any vested interested in any one given trade and (3) learn to let go of any negative feelings you might have about any one given trade. (4) Learn from your mistakes and the mistakes of other traders i.e. Get yourself a Forex Mentor, Teacher or Coach.
Arm yourself both educationally and mentally before you’re eaten up by the Sharks. Stay tune for part 2, which I give you concrete solutions to dealing with losing streaks and draw-downs.
Here’s hoping you have a magnificent day on PURPOSE!