Categories
Beginners Forex Education Forex Basics

Losing Trades: What They Have to Teach You

You have probably heard it before, a losing trade is the best teacher, but what does this actually mean and who does it apply to? Well, it applies to everyone and it is actually true, a losing trade can tell you a lot about what went wrong, and using that information can help you to adapt your strategy and can even be a lesson to stick to it.

It should be pointed out that this will only work if you are keeping a trading journal, this journal will detail different aspects of why you entered the trade, what the conditions were like, what the entry criteria were, stop losses, take profits, what happened in the markets and many more aspects, using this information we can look at exactly what went wrong, so be sure to record each aspect of what you are doing, you won’t regret it.

Having a bad trade does not necessarily mean that you lost a lot of money, in fact, some winning trades could be considered bad, especially if they go against the strategy that you are meant to be using.

When a trade goes the wrong way and hits your stop loss (because you are obviously using stop losses), we need to know why that happened, was your entry criteria not fully met? Was there some economic news that you did not know was coming? We need to ask questions like that and with the aid of your trading journal, it will make it far easier to pinpoint the exact place where the trade went wrong. We won’t always win, and the markets won’t always react in a predictable manner to some news, so understanding what you have done is paramount for your own learning.

Sometimes a trade may go well and you make a profit, however, if you did not stick to your strategy, it was mainly just luck that it didn’t go the wrong way. Have a look at the reasons why you deviated from the strategy, were you distracted? Were you bored? Any of these reasons is not a good reason to get into the trade, use this as a reminder, you got lucky, but you need to stick to your plan.

We have all been in that situation where we did something and we either automatically regrets it straight after putting in the trade, or a day later wonder why we did it. Askingthr4se questions and consulting your trading journals will help you answer these questions adn hopefully allow you to avoid making the same bad trades in the future.