One of the worst things in trading is judging the market correctly, or forecasting the market correctly, and still losing the trade.
This is something that every trader has experienced, and there is nothing more frustrating…
You enter short on the Euro, it hovers around has a fake spike and takes your stop by a pip or two, and then crashes back to the downside.
It really sucks.
But what is the answer to this problem?
Well, I will tell you one thing: the answer is not wider stop losses. Every trader has the thought “if my stop was just a little wider, I would have made so much money on this trade”
I am telling you right now, get that thought out of your mind!
Here is the thing, if you start making your stop losses wider, you are going to win a few more trades, but every single loser is going to hurt you more. Trust me, this is not going to be an overall profitable change for you.
My advice would actually be the opposite.. Use a tighter stop.
Now, I know this ironic advice, because it is definitely going to make you lose more trades and get stopped out on potential winners more often.
However, the truth of the matter is that no matter what your stop is, you are still going to lose trades, so why not use a tighter stop to reduce your losses, and then get back into the trade if the setup occurs again.
My point is that every trader is going to lose trades. It doesn’t matter how good the analysis or even the execution is. What matters, is that you are trading in a market, and the market will always create losing trades. So the best way to handle this, in my opinion, is to tighten up the stop loss as much as possible, get into the trade with safe risk, and don’t be afraid to lose the trade.
There is no solution to getting stopped out of trades, it is going to happen no matter what you do; but you can make those stops hurt less, and you can also make the times you get it right, make you way more money.
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