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3 Losing Trades and What I Learned From Them

By Jeffrey Cammack Updated: July 4th, 2019
Losing Forex Trades

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Forex trading is mainly about making profitable trades, but it is also about how well you manage the losing trades and bounce back after a significant trading loss.

Few people want to talk about losing trades, but sharing them is important because they can teach others about the pitfalls of trading CFDs.

While we could study beginner losing trades, or those where we burned out accounts, these won’t teach the most essential lesson of all.

The important losing trades to study are those that had the biggest emotional impact on the trader.  Even the most experienced trader will face big losses, losses that can leave a mark on their psyche.  Here are three losing trades and what I’ve learned from them.

Loss #1 – The AUD/USD Big Loss

This trading loss incurred on a long AUD/USD position taken at the beginning of 2018 when the Aussie was moving in a sustained uptrend and broke above the 2017 high.

I was so confident with this trade that I stopped following my trading plan and risk management strategy, I was only focused on the potential return of the trade.

When traders focus too much on a potential return, the mind switches off, and they forget about risk management measures and become overexposed.

I had no stop loss or take profit in place, and the market quickly moved in the opposite direction, leaving my position exposed and deeply in the red.

I know that I was a better trader to be making a mistake like that, but my natural inclination was to blame it on other things instead of accepting that I was wrong.  I was the problem with the trade, and if I was going to learn from this situation and bounce back, I knew that I needed to take responsibility for my actions.  Not point the finger outward, and instead, point it at me.

Loss #2 – Being Right and Still Losing Money

On occasion, Forex traders will open positions with the most common of the commodities.  Especially those that have a close relationship like oil or gold.

Everything was lined up for a perfect multi-day long trade on Gold/USD.  The issue was that I was managing a daily trade on intraday charts and got distracted by the day-to-day noise which got me stopped out of the position at a loss.

I knew I was right about the market direction but still executed the trade poorly and lost money.   Because I was under pressure, I was focused on one thing and forgot about the rest.

The lesson I learned was not to try to micromanage too many trades at once.  Getting lost in the noise of the markets will overload you with information, which can draw your focus away from the details you should be focusing on.

Loss #3 – Start Small after Multiple Trading Losses

I have learned that in hard times is essential to start trading smaller position sizes directly following a trading loss, as confidence in your ability to do analysis and your decision making is vital to a successful future trades.

Trading smaller positions help you gain your confidence back. Not only that, but it will protect your account balance in times when either your trading strategy isn’t performing well, or when you are misreading the market.

Conclusion

If you’re don’t analyse your losses, you’re never going to learn from your failures. Take note of what happened during losing trades in your trading journal. Writing it down is the best way to learn from your mistakes and it will help you figure out what the problems were.

The most important lesson of all is to keep to your trading strategy and be aware of how your emotions are affecting your decision making.  It is very easy to let them guide you down the wrong path or distract you from doing accurate analysis.

Trading Forex and CFDs is not suitable for all investors and comes with a high risk of losing money rapidly due to leverage. 75-90% of retail investors lose money trading these products. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.