So I was trading the BoE news today and put a trade on the FTSE100 and GBPUSD, my FTSE on started going well but reversed and a couple of indicators showed I should exit so I did with minimal loss (about 0.1% plus commission, so about 0.6% total). However, when I switched to my GBPUSD trade it looked as though it was going in the same direction, I exited that too, losing about 0.2%. These losses aren’t huge, however as you will see in the image below the GBPUSD trade went on to be highly lucrative, and there wasn’t a good enough reason to pull out. Other than experience, what are some good techniques or practices to strengthen resolve in these situations?
Experience is key, but, the market can always be unpredictable.
Look at it this way: You didn’t blow your account and you learned something. There is a certain portion of your trading capital that ends up just being “market tuition”. You paid, you learned, and your strategy should improve incrementally from here on.
Try to enter every trade with a few IF THEN statements. If the market does this, then I will do that.
You can speed up the learning by demo trading-- not in the traditional sense though.
My brokerage, TDA, offers up “OnDemand” software where I can go back in time and literally simulate trading in real-time with control of the clock. Look into that if you want to speed things up.
Other than that, move on, remember this trade, and get ready to relax over the weekend and hit the markets running next week.
I also have a trade on GBPUSD in which I was at a profit of 80 pips but that profit has now come to zero points.
However, in the current situation, I think GBPUSD bullish pressure will continue. Because the daily time frame will help a strong support trend line price to create bullish pressure.
I’ve done similar things with the rewind mode on Trading View, and the practice definitely helps.
I think everything you’ve said is exactly right, I’m having a lot of frustration because I’ve made some amazing entries over the last few weeks, but I’ve exited either at break even or minor losses/gains before some have then gone on to 2-5% profits if I’d left them.
I’m past being bothered at losses as I’m trading an account I can afford to lose and I know my Risk management is very sensible, but I think I’ve got myself in the weeds over my exits.
I’ll definitely take the weekend and come back with a different mindset next week. Thanks for the thorough reply.
Glad to help where I can. I can tell you have a decent head on your shoulders, and that’s half the battle. Keep grinding away.
If you’re serious about trading, make it a lifestyle. Tell yourself you’ll be trading for the rest of your life. Do you think in 3 months, 6 months, 2 years that you’ll be thinking about today and this trade? The answer is simply no. If you can stay in the game long enough, you’ll develop your own style of interacting w/ the markets and eventually you’ll spread your wings and never look back.
I hang around on this site for interactions just like this. Although I’ve been around the block a few times, it always helps me personally to interact w/ others that might be experiencing challenges. It helps to re-center/re-frame my own perspective on my own personal trading journey. And, it doesn’t hurt to keep drilling the basics.
The market doesn’t close forever at 5PM today. It’ll always open tomorrow and there will always be new opportunities. Just wait for the next setup - don’t force it - and try to adjust your trading plan so you can capture more of that 2-5% profit. Sometimes it’ll be the whole 5%, others it’ll be 1.5%. It doesn’t matter on a long enough time horizon as long as you can preserve capital and make it out the other end year over year.
Eventually you’ll get to a point where trading is literally one of the most boring things you can do to spend time. Sitting around waiting for setups, sitting around waiting for setups to play out, sitting around waiting for the next setup. You need to fill those gaps with other things (hobbies, interests, etc) or, you’ll start seeing things on charts that are not there, which leads to the death spiral.
When to exit from a winning trade is the difficult question in trading, and its hard to devise a hard-and-fast rule that you would incorporate into a strategy and obey every single time.
However, trading news, trading outside a trend, trading intra-day and trading using indicators just make this job all the harder for a new trader.
IMO, the GBP/USD is the most difficult to trade daily. It is for me, trading the Asian markets, and I’ve ceased to follow it. Better traders than me would wipe me clean every time.
Countless times, these retracements continue to occur, with no real identifying reasons - apart from maybe an instant market sentiment response to a news item…
…This pair is heavily monitored and traded by institutional banks and hedge funds, and I’m sure that the London v New York traders will be trying to outdo one another - hence the volatility, and change of directions to gain an edge and celebrate in the pub afterwards.
Enjoy the roller-coaster ride, friends…
I appreciate you saying that, I like to think I’m approaching it the right way but there is definitley a lot that I’m only going to attain through experience.
Currently, I have a routine of attending a 7:50 AM GMT+0 market analysis webinar after doing my analysis of any changes during the Asian session and then go on to the day, checking the charts at each candle close whilst trying not to spend the whole time staring just at the screen. I live in the countryside so I also make an effort to break away and walk for an hour so as to not get stuck at the computer. This seems to work for me as I give myself enough contact time to avoid missing entries, but have enough time away that I don’t become fatigued.
Thinking forward, as you said, seems to be coming slowly but surely. I think because this is something you can only do with yourself it’s difficult to create a gauge to compare by and so it’s easy to keep thinking of myself as “just practicing”.
Similarly, I come on here for discussions like this. I genuinely appreciate when people actually read the question and discuss it properly rather than giving generic throwaway advice, as being more open to discussion leads to new ideas rather than stopping at a closed answer. I imagine as you say, re-discussing even basic topics must be great for reinforcing your foundational skills?
A very prominent negative side to my mentality is I’m always holding myself to an unrealistic standard and forget I’m really still new at this and I have more to learn, so when I make a mistake or fail a trade I have the classic “I should have known better” mentality, but this is getting easier to control through keeping a diary and analysing the ‘why I did’ rather than the ‘why did I’.
One thing I’ve taken from this, and through looking at previous trades, is that when I set up a trade I should step away and let it unfold, let it reach even a small target like 1.5% like you said, and if I lose 1% it’s not outside the realms of my risk management. That way I can genuinely see how many times I would have a successful trade rather than letting emotion dictate my exits.
I usually read or cook during trading days and a bit of gaming here and there. Since I have dual screens from prior work and a laptop, it means if I see an entry coming up I don’t need to scramble to be ready, so that takes a lot of stress away. I also find if I lose a couple of trades, that stepping away and leaving it for the next day helps and avoids me revenge trading.
Thanks for such an in-depth discussion, it’s really great to be able to discuss this stuff with someone who has long-term experience.
How would you say they make it harder? As in it’s information overload or some such? Interested to hear more about that point.
I think a percentage rule works well, because even if it goes to huge numbers it could also reverse so having a set number might help, however theres no guarantee you’ll get it before it reverses I guess.
As I’m in the UK market, although volatile, I often find it to be a useful instrument to trade, but I completely agree with your sentiment. I think its best used for breakouts in my limited experience as it often breaks from a range violently in one direction so a quick intraday/scalp trade is possible, although not guaranteed.
No pubs for us at the minute! All closed for lockdown until April sadly.
Most new traders start by using all or most of these approaches to trading, especially trading intra-day. Most of them don’t last long.
Its sad that so few will have bothered or been patient enough to use a demo account to really understand different strategies and styles of trading before they start throwing money at the challenge.
Personally, I don’t see trading intraday or with indicators as being necessarily a bad thing, but it needs practice, research, and the right personality fit to work. Not sure if that’s what you were driving at and I’ve misunderstood, or do you think that in general they just shouldn’t be used?
I agree with the rushed mentality, I spent 6 months researching, practice trading and going through the Babypips SoP before I even felt ready to put any real money up, and even now I still heavily research and backtest as much as possible. I think people get dollar signs in their eyes and literally think ‘buy low, sell high ’ is an actual strategy that will get them rich.
What you mean by resolve? Accepting a loss maybe.
At news releases the volatily is huge. The commander-in-chief in that scenario is the news, don’t look at what your indicators say there, probably won’t play a key role.
Hello everyone. This is my first time posting here. Good to be here.
Quite an interesting discourse here. I subscribe to your point about sticking to your trades to know how many successful trades your strategy produces. That way you can establish a win rate for your strategy. The goal of any trader should be to use a combination of trading tools to build a strategy/system that ensures consistent profitability over a period of time. If that is the case then you can’t achieve that if you keep exiting your trades before they reach your set target or TP. There must be some stability to your trading style.
I believe a learning trader should first decide on strategy to use (combining price action/candlesticks with any indicator you have decided to work with OR any other strategy you choose that you think would work).
Secondly, decide your Risk to Return Ratio (RRR) eg 1:1, 1:1.5, 1:2…
Thirdly, Demo-Trade long enough to see how your strategy pans out.
After a number of trades you can tell what your win rate is (trades that go in your favour) say for every 10 trades using the same strategy.
Once I have determined what my RRR is and I have decided on a trading strategy then I have to allow every trade go all the way either to TP or SL. In most cases having decided on what % of my account to risk per trade (maximum loss) I would usually leave the trade even if it’s in the red till I am stopped out. On the profit side my tutor encouraged to exit a trade once I have achieved some positive pips so as to secure the profit. But I thought if I let my losing trades go on till I am stopped out and yet I keep taking only partial profits then I am no longer working with the same RRR I decided from the beginning and I can’t plan and have profit projections with my win rate. For example if my RRR is 1:2 (risking 2% to get 4%) and I allow my losing trades to go on till I am stopped out but don’t allow my winning trades to go on till they hit my TP then I am defeating the goal of building a strategy I can trust. If I consistently take maybe half of targeted profits then my RRR is no longer 1:2 but 1:1 or 1:1.2 and sometimes maybe less depending on when I take the profits.
Taking partial profits is saying you don’t trust your analysis and yi have to if you will be a successful trader in the long-run.
If you just take partial wins then establish a rule for doing so. A safe way to go is if perhaps you are working with a RRR of 1:2 you could perhaps take your wins if it does 75% of your target. This reduces your RRR to 1:1.75 for every such trade but you have to stick to this rule so you can still plan your profit projections after you have determined your win rate.
The key is stability and consistency in strategy.
Strategy takes away the gamble from the market and makes it what we call ‘trading’.
If you can’t stick to your trades to see how they play out then you can’t build a trusted strategy.
If you cannot establish a trusted strategy that if stuck to ensures profitability in the long term then all you doing is gambling and not trading. My Humble Take.
I hope I made sense with my long story.
I am just beginning in the trading world, but I immediately read “Trading in the Zone,” and felt like I was highlighting the entire book. I think it’s helpful to look at trading as your psychological experiment and be curious. As the others said, I’ve tried to take what I’ve learned and just move on. It feels like a mental practice as it goes against how I otherwise believe I’ve patterned myself. I love this idea that another mentioned about “market tuition.” That’s exactly how I’ve been looking at my losses. And, in the end, the more attention I pay to my equity numbers or stare back at all of my wins or losses, the more full my brain is, and I can tell that it impacts how I trade the next day. Best wishes for safe trading!
Great discussion. Just my 2 cents, always have a stop loss, either as part of the order, or manually, programmatically, etc. Set that stop loss at a level where you can clearly say your reasons for being in the trade in the first place no longer apply, then trust it until analysis of a meaningful number of trades suggests you should change it. With the spreads we eat, and retracement like a dog playing tug o war with a chew toy, forex trades love to spend time in the negative before they hit positive targets.
In my opinion, all the whipsaw also lends value to the idea of a two-tier exit. Have a tier-1 target that is easy to hit, and when you hit it, liquidate half the position and move your stop loss up to your entry point (plus spread) to lock in that small profit and eliminate the possibility of loss, then if it continues to move, put some sort of trailing stop on the remainder of the position in case it has more running to do. I know this is nothing new, but I do think the reason it’s a good idea to two-tier exit is the same reason people tend to get psychologically shaken out of trades early. It’s the whipsaw.
Of course, if you’re long-term trend-following, the question of exiting too early is not too critical - as soon as you exit you will have a re-entry opportunity almost immediately.
A lot of great replies here, so going to do one big one and tag people as necessary.
Resolve meaning determination, so in the sense that rather than losing faith in my strategy I instead remain confident, essentially just asking if anyone has a particular routine or technique that helps them with this.
I was actually trading the news with this strategy, the indicators are there as part of a different strategy I also use more generally.
A lot to cover here but essentially you covered a lot of the steps of good risk management, I usually aim for a 1:2 ratio, but will pull out at 1:1.5 if I see the momentum weakening. I think because I have a control freak element I need to find a way to disrupt that and not let my assumptions pull me out of good trades.
I backtested my strategy with a few variants over 1000 times and forward tested in practice around 100 times, but some of the issues I have come from switching to a live account I believe.
I’ve had that book mentioned before, I’ll have to check it out! I agree, I think I’m very much in the market tuition phase now!
I have both a set pip stop loss or price action stop loss depending on the strategy I use at the time, as for two-tiered I actually do aim for 1:2 but prepare for 1:1.5 depending on price momentum.
Then I think you may have to opt for not trading while news releases or in case you want to trade in those scenarios make some research about priorities: what this indicator tells is more important than what the news tells?
Probably, disable some indicators’ logic in those scenarios makes sense. Just an idea based on what I see in your picture. Volatility in news releases shouldn’t stop some trade that is in the right side. Anyway, it is too much complex to determine what’s best. As I said, just an idea.
One pro trader, Tom Hougaard has an alternative outlook to RRR. He cuts his losses early, and lets winning trades run by increasing the trade position, and moving up the S/L to near breakeven. This keeps risk the same.
For example, if using the 4hr chart, and if a winning trade makes 75 points, - and the chart is in a continuous trend - he’ll add to it, while moving his S/L. The reality is that no one knows how much profit can be made so ‘Reward targets’ is obsolete in this case.
The issue, as I see it, is that many traders stuck in their RRR bubble do not realise that the top pro traders know there is only 5 outcomes from any trade, and the following situations should be realised within c. 10-15 minutes from entry. I’ve suggested how you could act - it’s what I do - ignore it by all means.
- it nosedives from the off. Cut it quick. Repeat: cut it quick. Forget it, no emotional nursing, you got it wrong. There’s a better trade awaiting.
- it’s slowly losing. Cut it off, the odds are against it would suddenly trend into profit zones.
- it’s going nowhere away from the entry point. Cut it. Fund another trade instead.
- it’s slowly becoming mildly profitable, but unlikely to reach your profit level. Take the small profit. Fund another trade, instead.
- This one jumps off the page and hurtles into profit immediately and never looks back. This is the one you need to cherish and follow it closely, adding to your position as in pyramiding. It could surprise you, but trends tend to be prolonged, with minor retracements along the way. They usually end in a big bang.
This is what is money management, live.