Why Good Trades Lose.

Hey guys, it’s Nathan Tucci here writing about some of my recent frustrations in my trading. If you have been following my trading journal at all, you know that I was up about 400 pips over a 3 week span. It was by far my best stretch of trading ever, but I have sunk back just a little since then. I have had some nice winners and some rough losers in the past two weeks and have floated right around the break-even point in my account.

One thing that drives me crazy, and I am sure that it does the same to you, is when I make a trade that seems like a perfect entry–one I am really confident about–and it moves in the wrong direction just enough to stop me out and then shoots right back up in the direction I thought it would it go.

HOW DOES THIS HAPPEN?!

I want to give you some practical and simple help on avoiding this problem, but first, let me tell you a little story.

Tuesday morning I was sitting in the office with my boss, Casey Stubbs (yes, the guy who runs this website.) We were looking through the charts and calling out some different trade ideas when we both saw the EUR/USD 1HR at about the same time and both agreed it would be a great trade to make. Here is the chart that we were looking at:

So the EUR/USD had a nice rhythm of bouncing up and down, and Casey and I both expected it to bounce up so we could make some pips on it. We both went long at about the same time. As you can see, about two hours later, a tail cam through and stopped me out for a loss of about 75 pips. Meanwhile, Casey had given his stop a little more room and in the following hours, his trade turned into profit.

We both made the same trade, but one MADE MONEY and one LOST MONEY, this is an example of how I made a good trade and still lost money. And it is FRUSTRATING!

So how do you stop this from happening?

First, if you don’t like to have loose stops, don’t take a trade where the only reasonable stop is a wide one, like I did on Tuesday. A good idea for those of you who like to have low risk in terms of your stops is to trade pairs that don’t make dramatic moves in short amounts of time (for instance, avoid the GBP/JPY.) If you’re trading with a pair that moves more gradually like this:

Instead of like this:

then you will be able to make a trade with a much tighter stop.

Another way to avoid losing on good trades, is by being more patient. If you see a nice opportunity to enter, instead of taking the trade right away, let a few 15 minute candles close to make sure that it’s moving in the direction you had expected. If it does move solidly in the direction you want, go ahead and enter in.You may lose 15 or 20 pips of your total profit if you do this, but it could save you from losing A LOT more.

Lastly, and most simply, make sure you view the charts WELL before making an entry. Look at all the time frames to avoid taking a buy signal on an hourly chart when there is a nice sell position on the 4HR. Look back a ways on the charts to make sure that you are not going long right before a resistance point or shorting right before support. Don’t take a trade based on a full candle before it closes when there are 3 candles to the left that have long tales because your entry candle will probably become a tail too!! Don’t trade when a news announcement is about to come out that could change the pair’s momentum. These are all easy things that I know all of you do, but I am encouraging you to do them in complete form because if you are like me, sometimes you get excited about a trade and take it before studying the charts entirely.

I hope this helps!! There is nothing worse than losing on a good trade.

If you want to see the trades I am looking at, follow me on twitter; and as always, leave me some comments!

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Winners Edge Trading was founded in 2009 and is working to create the most current and useful Forex information and training available on the internet.

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  • Kumar

    Nathan, you have done very great job. These very good tips on trading properly to get profits
    Thanks a lot.

  • Andriy, Thanks for the tip I would love to learn more about how that works.

    Thanks

    Casey