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You can’t lose taking profits…or can you?
By Tom Long | September 11, 2007
One of the biggest problems new traders make is to take quick profits on a trade because they fear that the market will move against them and they will end up with a losing trade. A common statement I hear is, “Ringing the cash register is not a bad thing”. This means getting out of a trade when it is showing a profit is a winning strategy. If that is the case, then how come we see many new traders winning most of their trades and still losing money? It is more common than you might think. The problem of course is money management. This is what makes professional traders consistently profitable. They call it working a trade and it means having the patience and discipline not to take quick profits on a trade as soon as the market starts moving against your position. We would all love to enter into a trade, have about 60 seconds of anxiety and then just pure joy as the market keeps moving in our direction into big profits without a worry. Unfortunately, that is not real trading. Real trading involves planning your trade before you enter and then trading your plan. We need to think about using at least a 1:2 risk:reward ratio every time we are in a trade. If we risk 50 pips, we need to look for at least 100 pips in profit. That way if we win half of our trades, we are profitable. Sound easy? It is probably the most difficult key to successful trading and takes practice and confidence. But this is what trading is all about.
Tags: forex, forex trading, pips
Topics: Don't Trade Like This |