I’ve been trading for 2 years now, I go at proper strategy and a good trading plan, I think. I’ve been consistent but somehow I’m still busting my accounts, like I would make 4 or 5 profitable trades, but then 1 loss wipes out half my profits, so overall I end up busting my accounts. I put my stop loss and take profit all the time, but somehow my losses end up being bigger then my profits.
I feel I’m lacking the risk management part. I’m using the risk reward ratio of 1:2 and 1:3 but still my losses are bigger than my profits.
Sounds like you are closing trades to bank the profits too early. If you cannot resist the impulse to take profits early, you could try trading with smaller positions to reduce anxiety over potentially seeing profits disappear before you can exit.
Close losing trades early, do not nurse them in the hope they would reverse back in your favour. This is critical, as although I hate losing, I hate losing big, more so. There’s always another trade awaiting.
And do not overtrade or revenge trade in an attempt to get your money back. Patience and discipline instead.
I agree with previous posts. If your losses are much bigger than your wins it shows that you hate losing. I am similar - I know we all hate losing but some traders can be mentally disciplined and write this into their strategy. I don’t have that discipline so my strategy imvolves beey frequent small wins (I trade 20-100 times per day) and the occasional huge loss when I am sure that on taking that loss I’ll still be in profit.
The one advantage of the risky strategy of hanging on to losing trades is that in very up-and -down markets the price will often come back to you when you would otherwise be stopped out. If this is your cup of tea then try doing some hedging to cut you losses will waiting for the price to move. Some would say better to take the hit earlier but it all depends on your paychological make up whethee you are happy doing this or not and trading should make you feel good - not anxious and upset.
I would advocate building a strategy based on very high win rates (70-80%) which will compromise for a very low win to lose ratio. It’s what I do.
If a risk:reward ratio of 1:2 and 1:3 is making you lose half of your profits through one loss, well, there may be some defect somewhere. Maybe you are trying to make a bigger profit and not exiting your trades on time which is leading to big losses when the trade goes against you. Try placing the stop loss a little further, and not close your trades early. Also, try reflecting onto other parts of your trading plan. Take your time and be patient as you review your trading strategy, then identify and rectify the mistake.
I would advise you to let your winners run and use a tight stop loss. Risk management is crucial for profitable trading. Keep your drawdown in control at all costs. But good to hear that your winning streak is good as a trader. Just pay more attention to risk management and stick to your strategy.
isn’t everyone asleep