It’s all too easy to see a run of consecutive losses as a damning judgement on your trading ability. “After all,” you say to yourself, “I bet George Soros doesn’t have to deal with this – maybe I just don’t have what it takes?”
While it’s true to say that George Soros has a much better idea of how the currency markets than you or I – he is the most successful forex trader of all time after all – like every trader, he has suffered consecutive losses on countless occasions. Sometimes, the forex markets just don’t behave like you should reasonably expect them to, and to make matters worse, it’s impossible to predict when they are going to do that.
What you do need to do is to factor this into your equations. Expect that you will be wrong some of the time – . You don’t need to be right every time – in fact, you don’t even need to be right half of the time – you just need to make sure you come out ahead. How do you do this?
Well, first of all, you need to take a look at your own response to a bad run. Do you lose confidence? Do you drown your sorrows in an attempt to block out the reality? Or do you take it in your stride, and carry on following your trading plan?
If you hadn’t guessed, you should be doing the latter. And if you can’t manage this, look into the reasons why you can’t manage it.
Are you too impulsive? Too easily discouraged?
While it would be nice if there was some magic wand that you could wave to fix these sorts of things, there isn’t. We’re talking about your personality – the real you – here. If you can’t change yourself, change your trading plan to counteract the negative parts of your trading personality.
This brings us to the other area we need to focus on – your forex trading system.Unless you are trading with a clear strategy, you won’t be able to pick apart your trades and determine what went wrong. And if you don’t have one, there has never been a better time to start putting one together.
When trying out a system, it’s always much better to do this using historical data rather than trying it out in real time. That way, you can iron out the kinks before said kinks lose you money in the live forex markets.
Now, if you already have a system, it might be time to take a look under the bonnet to see if anything might be misfiring. Has the quality of your data been good so far, and if not, what can you to do improve this? Is there a way to get more reliable information, and just as important, more timely information?
What about the things you are using to identify trading opportunities, such as your Expert Advisors (if you’re using MT4) or your technical analysis tools? Could it be that they need re-calibrating? If everything seems fine in this regard, it could be that your recent series of losses is a sign that you need to re-think your trading system from the ground up.
The key to dealing with losses is to keep your eyes on the prize – your trading goals. If these goals are realistic, then they will take into account a string of losses. If your losses are too damaging, it could be that you need more diversification in your investment strategy, or that you should risk less of your total capital in each trade. Even the top Wall Street wizards make losses on a regular basis – it’s how you cope with them that determines your success as a trader.