Traders Really Do Need to Let the Winners Run

Trading Strategy
This is a guest post by forexfx4x

Foreign exchange currencies often present big trend opportunities when the fundamentals line up.  Many of those trends may last for years, however, many inexperienced traders come up with a fundamental oversight when attempting to transform those trends into a financial gain.

A lot of beginner traders are actually correct with regards to market direction, when looking for trends, but then wind up losing, simply because these people can’t handle large winners.  You heard me right – every trader desires for them – yet nearly all traders are unable to take these trends when on offer.  Allow me to expand on this.  Probably the most crucial rule associated with trading is allow profits to run to deal with the inescapable losing trades.  Almost all traders are not able to do that.  Any new trader is welcome to drop into our forex forum and discuss trade setups as they arise.   Pre-determine your target and attempt top follow the trade plan.

It is my practical experience that traders that happen to be on the money when deciding on trend direction often end up with losing trades.  Any sniff of a profit is banked with little focus on the bigger picture – which is that the system is all important and not the individual trade.  The larger the actual profit becomes the more likely they may be to take profit; the market could be offering a big runner but they choose to take a small scalp. Eventually these people grab any profit and bank a small gain.  These traders are unable to deal with the fact that any extended volatility may consume  open equity on trend retraces..

This leads to psychological dilemmas as well as the idea of sacrificing a profit which can be tricky to deal with.

Traders need to take full advantage of the winning trades and simply get out of the trade once your method lets you know it’s time – don’t over complicate thing -  it’s all about the bigger picture.  If you find yourself losing then take some time to trade on demo and remove money from the equation.  Learn to trade a robust method and don’t second guess it.

The author can be found in this Forex trading forum

Comments

I think ultimately the problem with losing traders is not neccesarily they get out before their profits run, more because they do not set themselves up with proper exit strategies.

It is great if you can pick out when the markets turn, and if you can see trends – these are not difficult, but deciding when that run has ended, or if it will keep going should be a technical decision and not an emotional decision. A lot of losing traders worry that they are showing in loss after making a trade, which is the wrong way to go about things…

Enjoyed the article, thanks!

I fully agree that a lot of traders feel fear as soon as they are in a winning position and something pushes them to close their trade far to early. But it is the same thing with loosing positions. Traders move their stops over and over again until they wipe out their full account. Before you can get profitable in trading you need to get in full control of your emotions set a stop loss and take profit and never touch it again until one of them is hit.

This strategy worked very well for us so far and it keeps you focused because you know what amount of risk you put on the table with every trade you make.

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