Sometimes small changes lead to big results…
And this is the kind of those “small” things that can have a great impact in your trading results.
Here is a little story
You go to the mall to buy a T-shirt… Once you get to your favorite store and see a few t-shirts, you decide to take the one in blue…
Once you get to the cashier, you tell him:
I want to take this t-shirt home but I don’t want to pay you for it…
Doesn’t make sense, does it?
That’s exactly what happens when you open a trade and you are not willing to lose.
When you go out to buy a t-shirt you pay something because you think you are going to get something more valuable than the money you are paying for.
When you open a business, you need to invest in resources first and you know that after a while, you are going to make that back. But there is also the possibility that you never make your money back.
So why is it that we think so differently in trading?
Hey Raul… this is nonsense, I’ve already accepted my risk.
Why do you move your SL to soon?
Why do you hold your losses for so long?
Why do you take profits to soon?
Why do you trade with no SL at all?
I think you’d like this story more.
This one is about a trader (perhaps you?)…
This trader doesn’t move his SL too soon, because he knows that he needs to give the market some room to breath. Otherwise he could get stopped out, and then see the market move in the intended direction… and he knows that it is not a very pleasant experience…
As soon as this trader see no point in holding his trades, he will gets out of them. He accepts the fact that it wasn’t the right time to trade it, moves on and keeps looking for more trade opportunities (perhaps in other currency pairs?).
This one is also a trader that doesnt take profits too soon. He knows that he needs to take advantage when the market moves in his favor. In fact, instead of taking partial profits, he thinks about adding to his trade (of course, provided that he gets a new signal based on his system).
And he always uses SL orders. Why? Because he knows that if he doesnt use a SL order, and the market does unexpected things… het could wipe out his trading account with just one trade. And that’s not fair, he has been working and trading so hard to take his trading account to where it is right now.
I thought you’d like this story more… What do you think?
The best thing you can do for yourself as a trader
I want you to stop thinking about your entry system, about the way you analyze the market, about trade management and I want you to think about RISK…
- Accept the fact that every time you place a trade, the market has the possibility to move against you.
- Accept the fact that sometimes the market moves in unexpected ways and there is nothing we can do about it.
- Accept the fact that you are going to lose some trades, you just need to limit the downside.
- Accept the fact that trading is a probabilities game. You just need to make sure to make them play in your favor.
Anatomy of a trade
This is what the thinking process of a trade should be.
You open a trade and decide to risk 40 pips for the possibility to make 100 pips.
What you are saying here is that you want to make 100 pips, and you are willing to lose 40 pips for the possibility to make those 100 pips.
You see? You are risking 40 pips…
Now, sometimes it makes sense to take partial profits, or to trail your SL level, etc. But everything should be in your trading plan.
So if you are going to move your SL level, do it because of a sound reason, not because you dont want to lose.
Same thing when you want to take partial profits, but please do it based on your trading plan, not because you “think” the market will do this or that.
For some traders (specially newbies) it makes sense to set and forget about your trades. Or even advanced traders that cant handle emotions might find it useful.
But please next time you open a trade, be willing to lose.
Again, it seems like a small thing… but it can have a great impact in your trading results.
I can tell you this is the one of the things that had a great impact on my results, and I bet it can have the same impact on yours.
Think about this… because if you are not willing to lose, then trading might not be the best for you.
If you have been struggling with this, I have a coaching program that can help you trade with good results.
Are you willing to lose?
What are your thoughts about risk?
Leave a comment.