The flaws in the risk management and forex trading discipline are to blame and therefore the first step for recovery is to expose those errors. An excellent “exposé” method is to keep a journal, or at least making a list of everything you did well and of all the trades that went wrong. In most cases pros will be heavily overweighed by cons. Focusing on your trades and learning by mistakes will make you more successful.
Here is the list of errors you might find during your observation:
1. Keeping the losing positions too long despite the indicators and news releases.
2. Exit winning trades too early and then keep getting burned by trying to get back in.
3. Letting others influence your decision making.
4. Ignoring the unnaturally high percentage of risk taking!
5. Getting influenced by greed, impatience, appetite for even more risk and lack of discipline.
6. Trying to make back the money you have lost (revenge trading!)
7. Treating the loss of money as something unacceptable.
8. Moving stop loss to worse position.
9. Mistake trading for gambling!
There is no way to have winning trades all the time. Your psychological agenda is to reach a touch of nirvana when it comes to the loss of money. Losing money in forex market should be considered as a gain in trading experience, a fee for a forex course, a lab experiment with quite expensive chemicals! Nothing is for free and even experience has to be paid for.
Greed and lack of discipline are another psychological aspect that needs your attention. If this is your problem, demo trading will not resolve it, because, in the psychological sense, real money trading is nothing like demo – we are all aware of this fact. My advice is to get back to the real trading and by encountering similar “failure” situations you will improve the discipline and greed control.
It is important to let go. The tendency to hold losing positions too long is a common and very costly mistake. Keeping the losing positions in hopes for things to turn around is a very wrong rule to follow. A lot of forex traders ignore the possibility of losing trades and usually delusion themselves with the idea of a successful comeback, the perfect conditions to exit the trade to “break-even”. However, revenge trading never works!!!! If you master getting out of bad trades quickly, you can then concentrate on running the profitable ones.
Do not clench to a trading position unless it has a great potential for profit. In that case you have to set a healthy limit order, because in attempts to maximize your return you might take too much risk and end up emptying the account. Personally, I set limits on all of my trades and I usually stick to the trade until the limit is reached unless the charts show a change in trend. Sometimes when it comes to profit, it is important not to concentrate on the amount. Instead, ponder on the idea - A profit is a profit! You have made money and it is yours! Besides, you can always get back in and ride the trade further in case the instrument goes through resistance/support levels.
Running positions isn’t an easy task either. You can easily get scared and freak out the moment a trade turns against you. Sometimes, it might be a good idea to simply take time off from trading for a day – take a hot shower, feed your dog, buy some groceries, meet your friends, do whatever makes you “ordinary” for at least 12 hours!
Follow your rules, especially stop-loss. If you are trading without a well-organized money management system, now is the time to put one in your forex strategy.
And for the last bit, couple of more suggestions:
1. Risking more than 1% per trade is insane!
2. Always stop/loss when you open a trade.
3. Do not move your stop/loss to worse position, even when guided my extreme seizure of greed.
4. Know your support/resistance levels before you enter a trade.
5. Enter trade competitions at your own risk = they do wake a gambling monster in all of us!