In this thread we will discuss how traders lose but could have avoided it. To complete this I will categorize the arguments. The goal of this thread is to show the bigger picture of how to trade and not trade!
_______________________________
List of how traders lose trades: (constantly updated)
_______________________________
Psychology:
- being stressed, unfocused or distracted
- being too hastily or closing winning trades too early while keeping/increasing losing trades
Money Management:
- accepting [10] straight losses which could cause 50+% drawdown
- using too high spread/commission-ratio
- enforcing margin call
Copying:
- using incorrect/outdated/complicated source signals (fundamental analyses, investor advice and trading articles)
Martingale:
- Adding on top of existing trades: adding lotsize in the direction of or opposite side of losing trades (hedging) does in no way increase the win probability. Many traders don't know this and so they are still inclined to use hedging/martingale. This is merely a recovery system to average down lotsize of losing trades. Unless you are trading conservative (for example 400% over a period of 25 years)(but on the other hand, will de facto still be valid for the next 25 years?) Conclusion: adding more lotsize to your trades will only move your risk on the chart upwards or downwards, but the win-lose probability stays equal.
- in hedging closing by SL instead of TP
Price Action:
- opening a trade on Friday evening. Argument: gaps are losing trades in general. Also, you are not able to average down, intervene (for example, add a trailing stop) and partial close this way.
- entering market execution trades (instead of pending orders)
- entering trades without spread-protection: you should (at least for your first order of the batch run) set a condition that spread is lower than 1 pip.
Evaluation:
- forgetting to analyse and evaluate one's trades at the end of the day. Argument: finding flaws will only improve your system
Fundamental analysis:
- forgetting to check the economic calendar for high impact news
Technical analysis: (most important category to discuss)
- most indicators, namely repainting indicators won't work (unless you are using a horizontal line, price action and befriend the main trend)
- a daytrader trading on a forex account with high swap costs
- a hedge scalper trading on a forex account with high spread
- using a trend-system at Asia Open or using a ranged-system at London Open
- Opening trades just before 0:00AM gmt Wednesday. Argument: because then you pay 3x more swap costs
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
Trending/Ranged market
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
Other:
- ?
- ?
- ?
Please, add more points to make the bigger picture complete. What do you think and what is your thought?
_______________________________
List of how traders lose trades: (constantly updated)
_______________________________
Psychology:
- being stressed, unfocused or distracted
- being too hastily or closing winning trades too early while keeping/increasing losing trades
Money Management:
- accepting [10] straight losses which could cause 50+% drawdown
- using too high spread/commission-ratio
- enforcing margin call
Copying:
- using incorrect/outdated/complicated source signals (fundamental analyses, investor advice and trading articles)
Martingale:
- Adding on top of existing trades: adding lotsize in the direction of or opposite side of losing trades (hedging) does in no way increase the win probability. Many traders don't know this and so they are still inclined to use hedging/martingale. This is merely a recovery system to average down lotsize of losing trades. Unless you are trading conservative (for example 400% over a period of 25 years)(but on the other hand, will de facto still be valid for the next 25 years?) Conclusion: adding more lotsize to your trades will only move your risk on the chart upwards or downwards, but the win-lose probability stays equal.
- in hedging closing by SL instead of TP
Price Action:
- opening a trade on Friday evening. Argument: gaps are losing trades in general. Also, you are not able to average down, intervene (for example, add a trailing stop) and partial close this way.
- entering market execution trades (instead of pending orders)
- entering trades without spread-protection: you should (at least for your first order of the batch run) set a condition that spread is lower than 1 pip.
Evaluation:
- forgetting to analyse and evaluate one's trades at the end of the day. Argument: finding flaws will only improve your system
Fundamental analysis:
- forgetting to check the economic calendar for high impact news
Technical analysis: (most important category to discuss)
- most indicators, namely repainting indicators won't work (unless you are using a horizontal line, price action and befriend the main trend)
- a daytrader trading on a forex account with high swap costs
- a hedge scalper trading on a forex account with high spread
- using a trend-system at Asia Open or using a ranged-system at London Open
- Opening trades just before 0:00AM gmt Wednesday. Argument: because then you pay 3x more swap costs
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
Trending/Ranged market
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
- ?
Other:
- ?
- ?
- ?
Please, add more points to make the bigger picture complete. What do you think and what is your thought?
Join our skype group.