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Getting Confident Because Of Winning Trades Is Stupid

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Yes, you can make a lot of money Forex trading.  Whether you swing trade currencies or day trade, the profit potential when trading with a quantifiable edge and a sized trading account, can be more than you make 9-5.

I’ve had many months in the 4-5 digit ranges and I can tell you from experience, that amount of money is addicting.  It is far beyond what the average person makes in that time span and extrapolate that over the year, much more than the average annual income.

And it is not hard.

Yes, the legwork of finding things that actually work in the markets takes a lot of time and brain power.  It is tiring work but worthwhile in the end.

Once you’ve done the work, the challenge now is to implement your trading strategy inside of a trading plan.

But the thought of it being simple……made me lazy and from lazy, stupidity was born.

stupid trader

Ultimate Stupidity In Trading Forex

What that means is I really did not appreciate the wins or the profits I’ve made.

I wanted more.

In my desire of wanting more thinking I will continue to make profits, I would start to deviate from my trading plan.  The thought that I would continue to reap the rewards of winning became too ingrained.

It lead to stupid things that now, after years of trading, I look back on and shake my head.

Closing out a solid gain in a swing trade that I nursed for months and then deciding to jump right back in the market.

So I place a trade again, and lose $250.

$250 was a tiny percentage of my trading account and given the windfall profits from the closed swing trade, it was virtually meaningless and I didn’t blink an eye.

But really, that loss gets to me.

A small itch inside me would say to trade again to win it back and the next trade is a loss.

“I’ve lost $500 already, I need to recover it.” What do you think I do?

I do the unthinkable.

I increase my contract size and the flawed logic in my mind is this:
“If I increase my contract size, all I need is just one or two trades and price just have to move just a little bit in the direction of my trade for me to recover what I’ve lost so far.”

See, I just needed a small move in my trade direction and I could shut the trade down.  The larger risk gives me a larger position size so a few pips can be worth a lot.

Instead of risking 1%, I bump the risk percentage to 4% and set the trade off.

To be a long story short….it didn’t end well.  I went on a 6 trade losing streak and it took a while to start the equity curve heading in the right direction.

Winning Streaks Comes As Often As Losing Streaks In Trading

When you are trading, there will be times where the trades you place will be so perfect and you can have winning streaks that make you feel invincible. Its like the stars are lining up for you.

Or there will be days where one or two trades will bring in a huge profits. It is during such times that your trading account increases fast.  But since wins and loses come in a random order, you had better prepare yourself for the loses that are coming.

Then it finally happens. That perfect trade setup doesn’t work out even though you followed your trading plan.  One loss you can take.  It’s when they add up that traders start to get rattled.

When you get rattled, stupidity sets in.

losing streaks

Every single trade you place, you think you know the outcome and that It will be profitable. But really that is not the case. The trade can either be profitable or turn into a loss. And you start losing, the natural human tendency is to say ” I can recover that loss.”

When you start thinking you can recover you loss that’s when stupid trading mistakes happen. That’s the exact time, If you are wise, to take a break from trading for a while. Clear your head and then come back with a fresh start. It’s always better to have that nice big profit in your trading account, so don’t give it all away to fast too soon.

Winning streaks don’t last.  Losing streaks don’t last.

You must, and I can not say this strong enough, must stick to the trading plan you traded when the wins were coming.

What To Do After A Winning Streak Or Big Wins

Here’s what I do after a string of successful winning trades in order to preserve my profits:

  • When you have an unusually high winning streak, one of the best way to preserve your profits is to take a break for a week or something like  that. Enjoy your wins. Chill out.
  • Another way is to really trade very small contracts when you know that you’ve made a lot of money in a very short space of time . For example, if you’ve been trading 1 standard lot, then start trading 0.25 lots instead of what you normally trade.
  • The moment you start thinking “I need to recover my loses” is the moment you should stop trading.  You need to go away, take a break, maybe a week away from trading…the market won’t miss you…will be still there when you get back with a clear mind and you will not miss any opportunity, believe me!

Trading is not just about pushing buttons according to your trading plan.

What is vital is that you short circuit the events that are leading you to become stupid with your trading.  Is stupid a strong word?

No.

  • Taking trades on gut feel is stupid
  • Risking too much that will wipe you out knowing losing streaks happen is stupid
  • Trying to make back losses on one trade is stupid

The best advice I ever got was from a successful crude oil trader who said to me:

“You’re going to win and lose.  Just act the same whichever way the pendulum falls.”

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