Sophia Todorova has a background in teaching and psychology, and as such relishes the idea of assisting new traders on their journey to Forex trading success. Technical Analysis is her passion. The charts speak, and she listens.
Have you ever had the experience in your trading where you’ve accumulated hundreds of pips at the end of the month but yet your equity curve doesn’t look quite as impressive as you would expect? Even worse…have you ever had a net loss when your account balance should have soared, after the number of positive pips that you made? Pip positive, yet dollar negative? Well, I have, and in the spirit of sharing and possibly helping other traders who might have experienced this, I will attempt to resolve the issue by looking at the reasons that may have contributed to this.
Undoubtedly, this can be an extremely frustrating place to find yourself. If you are experiencing this, you obviously know how to execute successful trades, so your system/strategy is not the problem, rather, equity management might be the weakness. These are the reasons I have come up with. I would also love to hear your own experiences and suggestions:
Randomly changing your position size can contribute to the problem. If you do this, sometimes the trades that you cut your size on could turn out to be the big winners, and the ones you feel confident enough about to increase your trading position on may just be big losers. In resolving this issue, it might be prudent to stick to a pre-determined position size, based on whatever percentage of your entire account that you are willing to risk. The aim here is to achieve consistency so that regardless of wins or losses, your bottom line will show a true reflection of how good your chosen trading strategy is, and will then allow you to make adjustments where necessary.
This is related to position sizing, but I think it deserves to be highlighted. You can probably relate to this; your previous trade was a loser, so you significantly increase your size in the next trade that comes along in an attempt to compensate. In my experience, this is a warning that some desperation might be creeping in, and desperation is based on emotions. We all know about emotions in trading. Nothing good comes from that…right?
The stark truth about trading is that success does not automatically result even after strings of winning trades. When entering a trade, the bigger timeframes should be consulted for upcoming resistance/support. Take note of how far into a trend your entries are. This is important because if, for instance you enter on a retracement in a trend that is nearing its end, you should set reasonable targets in relation to the nearest resistance/support levels on the bigger timeframes in order to avoid the seeking to run your trades when a reversal or deeper retracement is just around the corner. In other words, take your profits quickly. Some may call this greed, but that is not necessarily the case. It can simply be a case of ignorance.
However, if you have been able to catch the start of a trend, take advantage of this by allowing the trade to run longer, while scaling in and out on retracements.
Thanks for taking time out of your break to read this article. I wrote it with the desire to help us all improve and become better traders. Please share your comments
Winner’s Edge Trading, as seen on: