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So, you are in a trade and it looks like it's going against you. What do you do? Do you exit? Do you hold it? What are you thinking? Are you scared? Are you frazzled? Do you close your eyes and pray to the trading god's you stop loss does not get hit.
I know this is not an easy matter. It's definitely not easy is you in this situation right now. And if you are just understand that trading in the Forex market can suck at times, but its ok.
So, here is what I am going to do. I am going to show you that you are not alone. I'm going to take you through a trade I am in right now that is in a drawdown. Now some of you are probably thing, drawdown! That's not a losing trade. What if I told you some people consider draw down as a losing trade because they see red.
Let's think about our psychology from child hood. We were taught that red means stop, don't pass, or some evil deity that we want to stay away from. So, that in turn relates back to us as traders. I mean, let's be honest, who likes to see their trade go red? No one, right?
So with that said, there are two ways to manage losing trades and it deals with stop loss and draw down. A stop loss is where a trader decides a position that seems to be going against them. Drawdown refers to a trade going against the trader, but has potential to turn around for profits.
Here is a video that will show you the difference in a trade that I am currently running in drawdown at this moment:
See, I held my promise and yes, you are a normal trader. We all experience this.
So, if the pair you are trading seems to be going agains you, I need you to ask yourself this question, is it in drawdown or is it time to let this trade go?
If you take the time to re-evaluate your trade, evaluate it to understand if your trading rules have been invalidated or if price is revering on you.
For example, if you are the support and resistance trader and price moves against you, the key is not to move too quick. You have to breathe and ask your self, what is the trend? Is it possible that this could just be a deeper pullback? Really, look at the market and ask what is it really trying to tell you or are you trying to tell the market what to do because it wants to go against you.
If you look at the example picture above, using a 50 pip stop loss added above the entry, you can see how pice retraced and the trade went into drawdown. What would you have done? Exited or stayed in and trusted your analysis?
Look at the 2nd entry. Price made a deeper retracement and using that same stop loss, price triggered the stop loss and that would have been a losing trade, but price pushed down and eventually hit the targeted profit.
What was the difference between the two trades? Honestly, nothing. That is just the way price moved. One would ask, well Shaquan, how can we avoid being stopped out. There is only one way and that is not to use a stop loss. I don't recommend it to new or struggling traders. Other than that, there is no way to avoid it. You have to do your best to trade based on your trading rules and let the market do its thing.
The market is going to fight you and you have to fight back with it. What you will learn is you are not in control of the movement but you are in control of what you do.
If you need help understanding how to properly trade and create trading rules, join me at SLFX Trading here: https://www.slfxtrading.com/plans-pricing