This article looks at the reasons why a winning trade could turn into a losing forex trade.
One of the rules that you need to have when you trade on the forex market is to never let a winning trade turn into a losing trade. While having this rule is very important you need to consider why the winning trade could turn into a losing one. Only once you know this will you be able to implement controls that stop this from happening. The reasons that you should consider are the emotions of the forex market, a lack of focus and the lack of proper prevention orders.
The Emotions of the Forex Market
One of the reasons why a trade can turn from a winning trade to a losing trade is the emotions of the market. When you are faced with a winning trade you will feel the temptation to increase the profits that you are making. This trading greed that you feel will result in a number of different actions.
The first action is that you are going to remove any take profit orders that you have. The second is that you are going to constantly feel that the trade will move to a better price. The emotions that you feel on the market will cloud the ration part of your brain. When the trade starts to make a loss your emotions will tell you that the movement is temporary and that you will make the profit that you want.
Lacking Focus on the Market
Another reason why a winning trade can turn into a losing one is due to the trader not being focused. If you do not keep track of the trades that you are completing then it is possible for a trade to turn from a winning one into a losing one. This is due to the fact that you are not keeping track and you will not close the trade when you should.
There are some trading strategies that do not require you to constantly watch what your trades are doing. However, this does not mean that you do not have to check on your trades. If you do not check on your trades then you will have no way of knowing what the trade is doing and it could move into a loss.
Not Having the Prevention Controls
There are a number of prevention controls that you can use which ensure that you do not have a winning trade turn into a loss. Of course, you have to realise that these are not completely foolproof and there are times where you can have a winning trade become a losing trade even when you have these controls.
These controls will be the trailing stop loss order and the take profit order. When you have a take profit order you will have a point where the trade is closed once you have made the profit that you are happy with. The trailing stop can prevent the winning trade from losing all of the profit that it has made when it turns. It is important that you know how to place both of these orders when you are trading.
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