Euro / U.S. DollarEducation
Are Losing Trades Still Winners?
Alright, before I show you the “light at the end of the tunnel,” we need to create a fictitious system so I can logically demonstrate my point. I want you to bear with me here— it may seem a little ridiculous, but trust me, there’s a solid point I’m going to make. Let’s face the facts here: It’s easy to blame the market and commiserate with other traders, but it’s a lot harder to think for yourself and look for the silver lining after a bad trade.
I know, “Are Losing Trades Still Winners?” sounds like a crazy question, right? Read on and you may just find that it’s not really an irrational thought once it’s put into perspective.
Let’s list some trading rules to start:
1. You can only trade between the hours of 07:00 a.m. and 10:00 a.m. (UTC) London
2. You can only trade with the current trend of the market (up or down)
3. You must base your entries and exits using only support and resistance
4. You must have had a good night’s rest (no trading on 4 hours of sleep)
5. You must be drinking a Coffee while trading (just to be ridiculous)
Some trading rules to set for yourself, Right? I know, it’s a little silly, but what can I say? I like Coffee.
For this example, we’ll use an unrealistic stop for the EURUSD of 10 pips
Looks like we have a winner! You followed the rules by only trading during the established hours, you entered as the price breaks the support, you took the trade (SHORT) in the direction of the current trend, and your still in the trade right now as you hold trades over the weekend or youv exited at a round no level of 1.09 for a neat 1:11 RR come 14:30 p.m. , as planned (all while sipping your Coffee)!
We’re good, right?
Wrong: you broke a rule! By “widening” your stop, as you can see from the chart above the price surpassed your 10 pip stop loss set at 1.10200 reaching 1.10242 give or take a few pips (spread) before resuming the freefall, but hey your still in the trade or youv closed the full position for a healthy 110 pip gain, you violated one of your day trading rules; does this send you to the traders naughty corner?
Well, this is a losing trade (there will be losses, sorry), but you stuck to your guns and you've even created an opportunity to learn from your loss.
I’ll be honest here, a 10 pip stop on the EURUSD with as much volatility as there is these days isn’t only too tight, it’s not realistic.
Do some back-testing and you may find that the initial break of your rules (adjusting to 15 or 30 pips) may be what you need to set your stops at to weather the volatility and stay in the trade. If this is true, then make it a rule and stick with it.
For starters, I want you to know how important trading rules are and how important it is to stick to them. I mean, what if you widened the stop to, say, 50 or 100 pips and got stopped out?! You’d be mad at yourself! There is ofcourse different ways of deciding how many pips risk you are are happy to risk per individual trade as stop loss doesn't have to be fixed number you can adjust accordingly depending on the trade type/where price is when you reach your charts but this is an interlinked-subject that is beyond the scope of this idea
Another reason is that you can take a bad trade where you did stick to your rules and learn something from it. Who knows? Maybe you can even improve your day trading strategy.
Last but not least, your rules can help keep you on track. What if you did do the back-testing and you discovered that, more often than not, “that” particular rule held true?
If that’s the case, why change it?
After all, in trading, you’ll have some losses— it’s just part of the business. And remember: Don’t beat yourself up if you have a bad trade. If you stick to your rules, you’ve made the best decision you can. Give yourself an A!
Stay cool, drink Coffee, and trade well.
EURUSD
👍
I know, “Are Losing Trades Still Winners?” sounds like a crazy question, right? Read on and you may just find that it’s not really an irrational thought once it’s put into perspective.
Let’s list some trading rules to start:
1. You can only trade between the hours of 07:00 a.m. and 10:00 a.m. (UTC) London
2. You can only trade with the current trend of the market (up or down)
3. You must base your entries and exits using only support and resistance
4. You must have had a good night’s rest (no trading on 4 hours of sleep)
5. You must be drinking a Coffee while trading (just to be ridiculous)
Some trading rules to set for yourself, Right? I know, it’s a little silly, but what can I say? I like Coffee.
For this example, we’ll use an unrealistic stop for the EURUSD of 10 pips
Looks like we have a winner! You followed the rules by only trading during the established hours, you entered as the price breaks the support, you took the trade (SHORT) in the direction of the current trend, and your still in the trade right now as you hold trades over the weekend or youv exited at a round no level of 1.09 for a neat 1:11 RR come 14:30 p.m. , as planned (all while sipping your Coffee)!
We’re good, right?
Wrong: you broke a rule! By “widening” your stop, as you can see from the chart above the price surpassed your 10 pip stop loss set at 1.10200 reaching 1.10242 give or take a few pips (spread) before resuming the freefall, but hey your still in the trade or youv closed the full position for a healthy 110 pip gain, you violated one of your day trading rules; does this send you to the traders naughty corner?
Well, this is a losing trade (there will be losses, sorry), but you stuck to your guns and you've even created an opportunity to learn from your loss.
I’ll be honest here, a 10 pip stop on the EURUSD with as much volatility as there is these days isn’t only too tight, it’s not realistic.
Do some back-testing and you may find that the initial break of your rules (adjusting to 15 or 30 pips) may be what you need to set your stops at to weather the volatility and stay in the trade. If this is true, then make it a rule and stick with it.
For starters, I want you to know how important trading rules are and how important it is to stick to them. I mean, what if you widened the stop to, say, 50 or 100 pips and got stopped out?! You’d be mad at yourself! There is ofcourse different ways of deciding how many pips risk you are are happy to risk per individual trade as stop loss doesn't have to be fixed number you can adjust accordingly depending on the trade type/where price is when you reach your charts but this is an interlinked-subject that is beyond the scope of this idea
Another reason is that you can take a bad trade where you did stick to your rules and learn something from it. Who knows? Maybe you can even improve your day trading strategy.
Last but not least, your rules can help keep you on track. What if you did do the back-testing and you discovered that, more often than not, “that” particular rule held true?
If that’s the case, why change it?
After all, in trading, you’ll have some losses— it’s just part of the business. And remember: Don’t beat yourself up if you have a bad trade. If you stick to your rules, you’ve made the best decision you can. Give yourself an A!
Stay cool, drink Coffee, and trade well.
EURUSD👍
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