Forex Trading Strategies – How I Turned a Losing Trade to a Winning Trade.
Forex trading pair: GOLD = XAU USD This is an interesting trade on the forex pair XAU USD. In the chart above, we see a series of forex price action inside bars. (Highlighted in the blue box) Meaning bars that are smaller than the previous bars. When a series of inside bars like the above happen. It means that price is having an indecision of where to go. It’s like it is gathering momentum, for a burst out of either side. Which could either be up or down. So what happened in this scenario is that we placed 2 pending orders. A buy and a sell. These 2 orders are marked by the gold line (entry) and the red line (stoploss). So the buy order triggered. (Gold line -Entry) and we got in on a buy trade. With that, i took away the pending order for the sell trade and made it a stoploss for the buy order. Forex Trading Strategies – How I Turned a Losing Trade to a Winning Trade
When i trade, i would usually have 2 take profit targets. So that when take profit 1 is hit. Which is marked by the purple line. I would have taken my first profit off and shifted my stoploss for position 2 to break even. By doing so, i am also on the “SAFE” side. As price may hit Take profit 1 and reverse back down. And as i have taken profit a TP1, my 2nd position’s stoploss is shifted to breakeven. So i am in a FREE trade. So whether or not it may hit TP2. I have already gotten profits. In this scenario, i have taken profit at TP1 and my 2nd position has hit my stoploss for breakeven. So i’m out for this trade. From this scenario you can see that i am not always perfect. No one is. By trading on the above method, we are sure that our account size will grow consistently. Forex Trading Strategies – How I Turned a Losing Trade to a Winning Trade
Lets look at what happen next.
Price went right down after which. So if i hadn’t had a TP 1 and TP2 method. I would have kept my stop loss at the red line. And made a loss on this trade. BUT By doing playing the above method. Instead i have gotten profits.. I hope you gain something from this post. Let me know if you did.
You do know that using this method, you will most probably end up being a net loser.
The thing you have overlooked is that you are taking too small profits vs your expected losses. What happens if you have 5 trades in a row where TP1 isn't hit, but you are stopped out of all of them? How long would your account need to recover if all you get are TP1 profits one half the position?
Also, what if a nice trend starts in gold, but you take your profit at TP2? The obvious answer would be to re-enter, but then you sit with the same problem as outlined in my above paragraph.
Why not just be happy taking losses and letting profits ride?
While your method sounds logical, adhering to something like this will get you nowhere. If you wish to mentor, perhaps you could show a little more than a cherry-picked example. Why don't you show us an actual track record where this method actually generates income over a long period?
All that being said, I don't wish to come across as rude, merely pointing out that there is an inherent flaw in your method. If you play this game long enough, you may someday see that.
These types of strategies play on the human emotion of not wishing to have losses. If a trader can not accept that losses are part of the game, he should not be trading.
I am not a big believer in expectancy, but what is happening now is that you are decreasing your expected profit per trade, while your expected losses per trade remain the same. Granted, due to the smaller TP1, the win% will increase, but overall expectancy will most probably go down.
Most people are not willing to have a trade that showed a profit end in a loss. Since most people lose money, perhaps there is something to be learned from that. Most people also like taking profits. Again, perhaps there is a lesson in there.
HIGH RISK WARNING: Foreign exchange trading carries a high level of risk that may not be suitable for all investors.
Leverage creates additional risk and loss exposure. Before you decide to trade foreign exchange, carefully consider your investment objectives, experience level, and risk tolerance.
You could lose some or all of your initial investment. Do not invest money that you cannot afford to lose. Educate yourself on the risks associated with foreign exchange trading, and seek advice from an independent financial or tax advisor if you have any questions.
Any data and information is provided 'as is' solely for informational purposes, and is not intended for trading purposes or advice.
Past performance is not indicative of future results.