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Attachments: How can we avoid losing trades? - discussion thread
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How can we avoid losing trades? - discussion thread

  • Post #1
  • Quote
  • First Post: Edited at 5:16am May 23, 2018 3:48am | Edited at 5:16am
In this thread we will discuss how traders lose but could have avoided it. To complete this I will categorize the arguments. The goal of this thread is to show the bigger picture of how to trade and not trade!

_______________________________
List of how traders lose trades: (constantly updated)
_______________________________


Psychology:
- being stressed, unfocused or distracted
- being too hastily or closing winning trades too early while keeping/increasing losing trades

Money Management:
- accepting [10] straight losses which could cause 50+% drawdown
- using too high spread/commission-ratio
- enforcing margin call

Copying:
- using incorrect/outdated/complicated source signals (fundamental analyses, investor advice and trading articles)

Martingale:
- Adding on top of existing trades: adding lotsize in the direction of or opposite side of losing trades (hedging) does in no way increase the win probability. Many traders don't know this and so they are still inclined to use hedging/martingale. This is merely a recovery system to average down lotsize of losing trades. Unless you are trading conservative (for example 400% over a period of 25 years)(but on the other hand, will de facto still be valid for the next 25 years?) Conclusion: adding more lotsize to your trades will only move your risk on the chart upwards or downwards, but the win-lose probability stays equal.
- in hedging closing by SL instead of TP

Price Action:
- opening a trade on Friday evening. Argument: gaps are losing trades in general. Also, you are not able to average down, intervene (for example, add a trailing stop) and partial close this way.
- entering market execution trades (instead of pending orders)
- entering trades without spread-protection: you should (at least for your first order of the batch run) set a condition that spread is lower than 1 pip.

Evaluation:
- forgetting to analyse and evaluate one's trades at the end of the day. Argument: finding flaws will only improve your system

Fundamental analysis:
- forgetting to check the economic calendar for high impact news

Technical analysis: (most important category to discuss)
- most indicators, namely repainting indicators won't work (unless you are using a horizontal line, price action and befriend the main trend)
- a daytrader trading on a forex account with high swap costs
- a hedge scalper trading on a forex account with high spread
- using a trend-system at Asia Open or using a ranged-system at London Open
- Opening trades just before 0:00AM gmt Wednesday. Argument: because then you pay 3x more swap costs
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Trending/Ranged market
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Other:
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Please, add more points to make the bigger picture complete. What do you think and what is your thought?
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"How can we avoid losing trades? - DISCUSSION thread"

That's something we can't avoid.
We have losing trades because thisīs a probability "game".
When people understand that and accept that ... itīs when they are in the right direction.
POW!
Quoting fxprimate
"How can we avoid losing trades? - DISCUSSION thread" That's something we can't avoid. We have losing trades because thisīs a probability "game". When people understand that and accept that ... itīs when they are in the right direction.
Thank you for your reply. I appreciate it very much. This thread is about losing trades that could have been avoided. See above list. I'm looking to fill in the empty fields under: technical, trending and ranged markets, and others.
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  • Post #4
  • Quote
  • Edited at 5:21am May 23, 2018 5:11am | Edited at 5:21am
Michael,

the best way to MINIMIZE losing trades is to systematically take the time at the end of the day to make a "post mortem analysis" of the trades

This way we can identify the most numerically important flaws of the methodology we use
  • Post #5
  • Quote
  • Edited at 5:22am May 23, 2018 5:11am | Edited at 5:22am
Quoting fxprimate
"How can we avoid losing trades? - DISCUSSION thread" That's something we can't avoid. We have losing trades because thisīs a probability "game". When people understand that and accept that ... itīs when they are in the right direction.
You could interpret the question as how can one reduce (beginner) mistakes? How can a trader increase his losing trades (in a situation that was avoidable)?
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Quoting parisboy
Michael, the best way to MINIMIZE losing trades is to systematically take the time at the end of the day to make a "post mortem analysis" of the trades This way we can identify the most nueically important flaws of the methodology we use
Thank you. Ok, added to the list.

Yes it's a very important one
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Quoting michaellobry
In this thread we will discuss how traders lose but could have avoided it. To complete this I will categorize the arguments. The goal of this thread is to show the bigger picture of how to trade and not trade! _______________________________ List of how traders lose trades: (constantly updated) _______________________________ Psychology: - being stressed, unfocused or distracted - being too hastily or closing winning trades too early while keeping/increasing losing trades Money Management: - accepting [10] straight losses which could cause 50+%...
Do you want to hear the truth or you rather hear the usual lie?

If truth the only way to avoid a losing trade is not to trade.
If you won't believe the truth then buy when price cross above 50 ema and sell if below 200 ema. Easy and.sure money. If fail double down until margin call then exit trade when break even. No loss right?

Cheers
Hi

You cannot avoid losing trades as it is a part of the of this probable game.There are lots of ways to minimize you loss and still be on a positive side after several sample trades.

a) You should know what you are doing ( Solid Method)
b) Trust in your method.

Both the points will take lots of time. You cannot be a best driver in a day. That is for the the trader to analyse.It could take months or years to be very comfortable while driving.

In forex game it would take a minimum of 8 to 10 years . If you are not that much experienced and still making money. You are made for it or its a stroke of luck.you will soon be grounded. But if you stick to this game for 10 years that is around 10+ hours a day of charts time,Then you are a professional at the end of the 10th year or may little less than that. The reason i say this is cause you wont be taking trades consciously after these many years.your subconscious level will take over. Noobs wont understand what i'm discussing here.Just my 2cents
You can also change your definition of a trade. I consider a trade an overall position and not the individual components that make up that position. Options traders will know what this means. For example my G/J spread trade from last night/this morning. I did a short side heavy straddle. The long side lost. Short side won. And won by a landslide. I consider that going 1 for 1 and not 1 for 2 because the loss was accounted for in the trade.

I've got an E/U position I've built out that has 2 components that are currently sitting in the negative but the other 2 are heavily in profit. This trade is a winner so far.

I also don't link winning and losing to profitability. If I execute a trade properly I consider that a win. If it ends of in the negative, and I executed properly that means I kept the loss to a minimum. That's just as big a win as a being profitable because not executing properly can be a huge loss or a blown account. Hell, I've been more excited getting out at b/e sticking to the plan and not panicking when things didn't look like they were going to pan out than times when everything comes up aces and I just sit and collect.

And finally, the biggest lesson I've learned in over 20+ years of this dumb game is that if losers are a big deal to you it means you're trading larger than you should. Either trade smaller or put more money in the account. Well, that and make sure you have positive expectancy. If you have no idea what that means, either learn it or rescind yourself to being a liquidity provider for profitable traders.
Don't participate in a negative sum game - stop trading.

It works - You will never ever have a losing trade. ;-)
Quoting HudithePfupf
Don't participate in a negative sum game - stop trading. It works - You will never ever have a losing trade. ;-)
I think, a proper game plan is very essential here! it’s a knowledge based profession, without proper knowledge the path is too much sticky.
Quoting magentfx
Hi You cannot avoid losing trades as it is a part of the of this probable game.There are lots of ways to minimize you loss and still be on a positive side after several sample trades. a) You should know what you are doing ( Solid Method) b) Trust in your method. Both the points will take lots of time. You cannot be a best driver in a day. That is for the the trader to analyse.It could take months or years to be very comfortable while driving. In forex game it would take a minimum of 8 to 10 years . If you are not that much experienced and still...
Thank you! How would you describe a) and b) in concrete steps for our list?
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By not trading.
Pecuniae obediunt omnia
Quoting JR97
You can also change your definition of a trade. I consider a trade an overall position and not the individual components that make up that position. Options traders will know what this means. For example my G/J spread trade from last night/this morning. I did a short side heavy straddle. The long side lost. Short side won. And won by a landslide. I consider that going 1 for 1 and not 1 for 2 because the loss was accounted for in the trade. I've got an E/U position I've built out that has 2 components that are currently sitting in the negative but...
Thank you!
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Quoting MariaEduard
{quote} I think, a proper game plan is very essential here! it’s a knowledge based profession, without proper knowledge the path is too much sticky.
Thank you! For our list, could you please describe the steps concretely regarding a proper game plan: what category and what steps?
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Quoting PIPot
By not trading.
I agree. But to go into the thread, how would one minimize losses even if the result ends up being a losing trade?
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some people just think that floating loss is not true loss until it they close the position. it can create an illusion in the report that they get higher winning %.
gives morale boost that their system works.
in a sense, they avoid loosing trade being written in their report.
Quoting michaellobry
{quote} I agree. But to go into the thread, how would one minimize losses even if the result ends up being a losing trade?
By using different Exit system/methodology/criteria than the ones for entry!
You enter cautiously and exit aggressively (if that makes any sense).
If you have an entry criteria in your trading system (whichever that is) look on how to exit safely and as soon you have doubts about the trade in order not to lose to much of your profit or account, even if that means to leave some pips on the table, you could re-enter a trade at any time if you fell safe again.
The other thing I forgot to mention is that don't look at trades as individual events. Look at your time frame. Are you a scalper, day trader, swing trader, long term position trader, etc. I'm more of a day trader. I don't give a shit about individual trades. It's all about the day as a whole. I haven't had a losing day in weeks. Have I had losing trades? Of course. But I also know my win%, average r:r, etc, etc. The probabilities of my method are massively in my favor. So even if I see a couple of losing days in a row, I know that if I just keep at it, it's all in my favor. So a few loser trades here and there is no big deal because my system accounts for those and my overall money management/trade management accounts for those as well. Moreover, on the rare occasion I take a medium sized losing trade, which again, my method accounts for, I know I'm still coming out ahead in the end because it's accounted for in the system and the day overall at worse will be a small losing day but typically will just be a small winning day versus my average winning day.

You asked above how to keep losses to a minimum. Here's how I do it.
1) Scale in. Rather than put your whole nut in up front, scale in small. If/when the trade goes in your favor, keep scaling in small. But also have a limit on how much you're scaling in and definitely know at what point you're wrong rather than continuing to scale in on a loser because you're married to the trade.

2) Hedge. I know it's in your list of things not to do, but hedging is how I rarely lose. Most traders have no idea how to hedge and just end up losing on both sides. But I hedge with options so it's not the same at all although I could hedge with correlated pairs in spot but it wouldn't be as effective. Most of my options hedge trades end up profitable depending on the strategy. My straddle option hedge losses are part of the trade and are absorbed with the winning side easily. I'm getting 2:1 minimum. The other night I got 5:1. That's the power of options.
Quoting michaellobry
{quote} Thank you! How would you describe a) and b) in concrete steps for our list?

Hi michael

I feel its more like a feeling. It can be felt and don't think i'm good at explaining.Nor there is a way to explain it. The day comes when you do not have to think nor not think. You will just do what you are supposed to do. Like driving a car for 5 years are so. everything happens automatically . Steering / Brake/ Clutch/gear/ mirrors /positioning everything .All the above things are done in probably less than a second.

It's a feeling.
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