When we discussed with Forex traders the problems they encountered while their trades were in progress, we found a common problem — watching winning trades become losing trades.
As we have already discussed, if you fail to manage your entire Forex trades from the entry to the exit, this will certainly happen to you, and be seemingly unstoppable at that.
Here is the basic issue of the problem: An initial stop loss is entered when a trade is entered.
The majority of traders attempt to realize ALL their profit at one time, but they do not set a ‘target’. When the trade begins to become profitable, many traders ’screengaze’, focusing on the amount of money they have made or are currently making. The mistake they make is that they do not plan on when to exit the trade — they stay in the trade too long and often watch as their profits dwindle when the market turns against them. Then they make matters worse by staying EVEN LONGER in an effort to ‘get back’ the profits they lost. This proposition, in Forex trading, is a loser.
They have lost the view of the purpose of the trade due to GREED.
Why is a trade carried out? It’s easy, minimize the risk and maximize the gain.
You do not have to exit a trade at the very peak in order to maximize gain. While the trade is in progress, you should have set rules that tell you when to exit for profit — and it is not when YOU believe it is!
More on that later… Minimizing risk is not just setting and then forgetting the initial stop loss — it is crucial that you manage your stop losses throughout the entirety of a trade.
When a trade is entered by Forex traders, their capital is protected initially and profit is thought of after. They can do the correct thing to safeguard their capital AND profits when their position begins to climb up.
Actually, there is an assumption that there will be a loss on each trade by many Forex traders that are successful. They adopt this psychological deception to ensure that their risk strategy is always employed to the utmost! When a trade begins to go their way (rather to their amazement), the first thing they do is put themselves into a break-even trade situation and then use relentless stop loss management to maximize their gains on the trade.
Risk is thought of first and second is profit.
You can have a better idea of how it’s done by watching this video: http://www.theforexnittygritty.com/private-forex-training